THE NEXT LOW-COST,
SUSTAINABLE NICKEL PRODUCER
2021 Report and Accounts
HORIZONTE MINERALS IS A LEADING NICKEL COMPANY THAT IS
DEVELOPING TWO TIER ONE PROJECTS, THE ARAGUAIA FeNi PROJECT
(ANP) AND THE VERMELHO Ni Co PROJECT (VNCP), IN PARÁ STATE, BRAZIL.
OUR PURPOSE IS TO PRODUCE NICKEL, WHICH IS CRITICAL FOR THE
GLOBAL CLEAN ENERGY TRANSITION, IN A PROFITABLE, SAFE AND
SUSTAINABLE MANNER TO DELIVER VALUE TO ALL OUR STAKEHOLDERS.
2021 HIGHLIGHTS
US$ 633 MILLIONFUNDING PACKAGE
FOR DEVELOPMENT OF ARAGUAIA
PROJECT FINALISED
US$25 MILLION ROYALTY AGREEMENT
TO ADVANCE THE VERMELHO PROJECT
THROUGH TO FEASIBILITY STUDY SECURED
0 LOST TIME INJURIES
0 ENVIRONMENTAL INCIDENTS
90%BRAZILIAN PROJECT TEAM
100% ARAGUAIA LEAD TEAM RECRUITED &
91% ARAGUAIA OWNER’S TEAM RECRUITED
HUMAN RIGHTS AND WHISTLE BLOWER
POLICY ADOPTED
1500 NATIVE SPECIES GROWN TO PROMOTE
FLORA DIVERSITY AND REHABILITATION
BRL $38M ECONOMIC CONTRIBUTION
ANNUAL REPORT
1 Highlights
2 At a Glance
STRATEGIC REPORT
4 Chairman’s Statement
6 Building a Sustainable Business
10 Business Model
12 Strategy
18 Market Overview
20 Operational Review
22 Sustainability Review
24 Stakeholder Engagement
26 Financial Review
28 Risk Management
30 Principle Risks & Uncertainties
CORPORATE GOVERNANCE
34 Note from the Chairman
35 Our Approach
36 Our Corporate Governance
Structure
38 Board of Directors
40 Board Report
43 Audit and Risk Committee Report
44 Remuneration Committee Report
46 Director’s Report
48 Statement of Directors’
Responsibilities
FINANCIAL STATEMENTS
49 Independent Auditor’s Report
56 Consolidated Statement
of Comprehensive Income
57 Consolidated Statement
of Financial Position
58 Company Statement of Financial Position
59 Statement of Changes in Equity
61 Consolidated Statement of Cash Flows
62 Company Statement of Cash Flows
63 Notes to the Financial Statements
99 Statutory Information
AT A GLANCE
OUR BUSINESS
Horizonte Minerals
is a nickel-focused resources
company developing two Tier 1, 100% owned projects
in northern Brazil. The Araguaia Ferronickel Project
and the Vermelho Nickel-Cobalt Project are both high
grade, low cost and long mine life projects. These projects
provide Horizonte with a potential scalable production profile of
approximately 60,000 million tonnes of nickel per year.
As a critical component in both stainless steel and new battery
technology, nickel is a key enabler of the global clean energy
transition. A part of this sustainability driven supply chain,
Horizonte is focussed on developing its operations to produce
low-carbon, high-grade nickel ethically, safely, and responsibly.
Horizonte is listed on the London Stock Exchange Alternative
Investment Market (AIM) and the Toronto Stock Exchange under
the code ‘HZM’.
Pará
Brazil
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ARAGUAIA NICKEL PROJECT | HIGH-GRADE, LOW-COST, LOW-CARBON FERRONICKEL FOR THE STAINLESS STEEL INDUSTRY
2011
2014
2016
2018
2020
2021
2022
Greenfields
discovery by
Horizonte team
Acquisition of
Teck project
Acquisition of
Glencore project
Completion of
Feasibility Study
Completion
of value
engineering and
mobilisation of
owner’s team
Secures
US$633M
comprehensive
funding package
Start of
construction
The project comprises an open pit nickel laterite mining operation
that mines a 27.3 Mt Mineral Reserve of a 119 Mt Mineral
Resource to produce 52,000 tonnes of ferronickel (FeNi) containing
14,000 tonnes of nickel a year, for 31 years from line one. The
metallurgical process comprises a Rotary Kiln and Electric Furnace
(RKEF) to extract FeNi from the laterite ore. The RKEF plant and
project infrastructure will be constructed over a 24-month
period at a cost of US$477.3 million for the mine and process
plant, and a further US$39.6 million for business establishment
and production-related costs. After an initial ramp-up period, the
plant will reach full capacity of approximately 900,000 tonnes of
dry ore feed per year. The FeNi product will be transported by road
to the port of Vila do Conde for sale to overseas customers. The
RKEF process, and its associated equipment, is a well proven
technology with 60 years of commercial experience in more
than 30 operations worldwide. It accounts for approximately
55% of global laterite-sourced nickel production. Brazil has three
operating RKEF facilities (owned by Anglo American and Vale),
with more than 30 years of combined successful operations.
The Value Engineering Study and subsequent Execution
Preparation Phase work has optimised the RKEF flow sheet and
worked to establish integrated process islands with tier one
suppliers linked to the Export Credit Agency (ECA) project financing.
A key part of the Stage 1 project design was that the RKEF plant
and associated infrastructure was designed to accommodate the
addition of a second RKEF process line (Stage 2 expansion), which
is intended to double Araguaia's production capacity from 14,500
t/a nickel up to 29,000 t/a nickel. The Project Mineral Resource
inventory has the grade and scale to support the planned increase
in plant throughput from 900 kt/pa (Stage 1) to the Stage 2 rate
of 1.8 Mt/a supporting the twin line RKEF flow sheet. The Stage
2 expansion assumes operating at a Stage 1 production rate of
900 kt/pa for three years, after which free cash flows would be
reinvested to expand the plant to 1.8 Mt/pa via the addition of a
second line.
VERMELHO NICKEL COBALT PROJECT | HIGH-GRADE, LOW-COST NICKEL AND COBALT FOR THE BATTERY INDUSTRY
2017
2019
2021
2022
Acquisition from Vale
Pre-Feasibility Study completed
Ramboll undertaking ESIA
Commencement of Feasibility Study
The project comprises a planned 38-year mining operation with
an open pit nickel laterite mine that extracts a 141.3 million tonne
(Mt) Probable Mineral Reserve (at a cut-off of 0.7% Ni) to produce
924,000 tonnes of nickel contained in nickel sulphate, 36,000
tonnes of cobalt contained in cobalt sulphate and a saleable
by-product, kieserite (a form of fertiliser) of which 4.48 Mt are
produced. The Vermelho project pre-feasibility study utilised a
hydro-metallurgical process comprised of a beneficiation plant
where ore is upgraded prior to being fed to a High-Pressure Acid
Leach (HPAL) and refining Plant which produces the sulphates.
The plant will be constructed in two phases, with an initial capacity
of 1 Mt per annum (Mt/a) autoclave feed (Stage 1). After three
years of production, a second process train (Stage 2 Expansion)
will be constructed, which will effectively double the autoclave
feed rate to 2 Mt/a. The Stage 1 plant and project infrastructure
will be constructed over a 31-month period. The nickel and cobalt
sulphate products will be transported by road to the port of Vila do
Conde (the same facility planned for Araguaia) for sale to overseas
customers. The kieserite will be transported to consumers within
Pará state.
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CHAIRMAN'S STATEMENT
of debt, equity, offtake, and cost overrun facilities, it has nonetheless
been an incredibly complex process with multiple parties in constant
negotiation. In late 2021, we were delighted to secure a $633 million
funding package which fully funds stage one of the project and provides
the company with $100 million of contingency, growth allowance
and cost overrun facility. The package was made up of $346.2 million
debt package in two tranches, a $146.2 million Export Credit Agency
tranche with EKF and Finnvera and a $200 million commercial tranche
underwritten by BNP Paribas, Natixis, Societe Generale, ING and SEK
with both tranches being secured with competitive interest rates. We
also welcomed La Mancha and Orion as new and existing, respectively,
strategic investors and shareholders in Horizonte, and grateful for the
continued support of Glencore who, in addition to their cornerstone
investment, extended their relationship with the Company by agreeing
to enter into the offtake agreement. The offtake agreement is a 100%,
10-year agreement based on LME pricing and therefore continues to
provide our shareholders with good exposure to the nickel price.
La Mancha and Orion have long track records of creating sustainable
shareholder value in the mining sector and their previous investments
highlight their ability to identify compelling growth opportunities at
an early stage. We believe the terms of the financing package and
the calibre of the lenders and strategic investors we have attracted
is a testament to the strong project fundamentals offered by the
Araguaia project. The investments from La Mancha, Orion and Glencore,
alongside the Senior Debt Facility from the syndicate of leading
international financial institutions, provides a strong endorsement
of our broader corporate strategy to develop Horizonte into a major
nickel producer. The funding package has completely transformed our
shareholder register, with further institutions adding their support in
the New Year. Institutionalising our register is an important part in the
Company’s growth story, providing us with support and confidence to
accelerate our plans of advancing both Araguaia and Vermelho. We
look forward to working with our new shareholders and continuing to
receive the support from those who have followed us on this journey.
There has certainly been a focus on Araguaia in recent years but,
this is by no means a reflection of the quality of Vermelho. Work at
Vermelho has been quietly progressing with a small, dedicated team
and the appointment of Ramboll to undertake the Environmental and
Social Impact Assessment. This assessment is a key requirement for
permitting and the feasibility study. As part of the Araguaia funding
process, we were able to secure a $25 million royalty agreement with
Orion. These funds are dedicated to the acceleration of the Vermelho
feasibility study. Over the coming year, shareholders can expect to
see more activity from the project as we work to position Vermelho
alongside Araguaia as a future nickel and cobalt producer. With
the electric vehicle market recording a record year in 2021 and car
manufacturers adopting high-nickel content batteries at a faster pace
than expected it is an opportune time to position our world-class battery
grade nickel-cobalt project at the forefront of the Horizonte story.
Growing our team
The team in Brazil has grown rapidly in the past year, and it is very exciting
to see that we have been able to attract of some industry’s top talent.
We started the year with announcing the appointment of our Head of
Projects, Michael Drake. Mike is a Mechanical Engineer with extensive
international leadership experience in the construction, operation
and optimisation of medium to large capex projects, with extensive
expertise in both ferro-nickel, and nickel acid-leach operations.
Prior to joining Horizonte, Michael worked for BHP, Newcrest Mining,
and WMC Resources. Based out of our Brazilian headquarters in
Belo Horizonte, Mike has worked hard to not only build an industry-
leading team but also create and implement the working practices
and reporting structures across the areas of procurement, engineering,
environment and social and human resources, required to successfully
build a tier one nickel project. Later in the year, he was joined by Leo
Vianna as Araguaia Project Director. A Brazilian national, Leo is a
Mechanical and Mechatronic Engineer with over 24 years experience in
project implementation and management. He was previously Project
Director for Vale’s $1.9 billion Bahodopi ferronickel project in Asia.
Horizonte now has the capability to build and deliver the Araguaia
ferro-nickel project, as well as simultaneously progressing Vermelho.
Supporting our communities
We have continued to support vulnerable families in our local
communities who have struggled through the Covid pandemic. We
also assisted Conceição do Araguaia’s vaccination effort by donating
10,000 medical items to the regional hospital. The vaccination effort in
the region has progressed well and allowed for life to return to a level
of normality. Our social team was therefore able to be more present
in the local communities rather than engaging solely by virtual means.
An important focus for engagement this year has been what the
communities can expect in terms of on-site activity and the increased
workforce in the region, resettlement, local employment opportunities
and local suppliers and services. Having operated in the area for over ten
years Horizonte has excellent relationships with its local communities
and is confident this will continue. Alongside the construction phase
of the project, we will be working on new local initiatives as part of
our Local Development Agenda and working with SENAI to train local
people in the skills required to aid local employment at the project.
Sustainability
This year we will be publishing our third annual Sustainability Report in
which we are now able to track our progress clearly and transparently
against our commitments in the areas of environmental stewardship,
social development, and corporate governance. A standalone report
such as this continues to be a rarity from pre-production companies
and sets Horizonte apart with its commitment to best practice
sustainability standards. These sustainability standards were one of
the key drivers for Horizonte to be able to secure the high calibre of
lenders and investors in the Araguaia funding process.
Following renewed commitments at the United Nations Conference on
Climate Change (COP26) in Glasgow, the International Energy Agency
highlighted nickel’s critical role in the clean energy transition both
through its use in batteries and stainless steel. As part of this net-zero
supply chain, Horizonte’s sustainability credentials have been key to
our investment opportunity. By integrating sustainability-focussed
design into early project planning and engineering Araguaia, through
our carbon emissions reduction programme, Araguaia will be able to
become one of lowest carbon emission projects of its peer group.
The nickel market
The nickel price ended 2021 30% higher than the previous year.
Stainless steel production increased 17% year on year, and it was an
unprecedented year for the electric vehicle market. 18.5% of all new
cars registered in the U.K. were either hybrid plug-in or fully electric.
The year ended with a 160,000 tonne deficit due to supply constraints
from major producers citing labour strikes, adverse weather and
Our neighbour Daniel and our mining technician Bruno
showing 'bacaba' palm seeds produced around the Project
logistics issues. The new year has started with decade high prices due
to record low inventories and concerns over future supply and nickel
demand is expected to reach 3 million tonnes this year. The consensus
is that nickel demand is increasing exponentially both to supply the
established stainless steel market and the accelerating battery market
but the true growth curve remains contested, perhaps conversative
estimates a 100% increase in demand by 2040 while the International
Energy Agency recently stated that the nickel demand will increase 19-
fold if the world expects to meet the commitments made by the Paris
Agreement on climate change.
Horizonte is one of very few nickel stories ready to supply this deficit,
and our projects can supply both the stainless steel and battery markets.
Acknowledgements
This will be my last statement as Chairman of Horizonte Minerals. It
has been a privilege to be involved with the Horizonte team from its
initiation and to see the development of your company through initial
nickel discovery at Araguaia and subsequent major deals initially with
Teck, then with Glencore to consolidate the entire district and the
acquisition of Vermelho from Vale resulting in Horizonte becoming a
major nickel player.
In line with the Company’s transformation the Board is evolving to
better reflect our shareholders and the skillset required to successfully
deliver two tier one nickel projects into production. Horizonte strives
for best practice corporate governance standards and will therefore
be undergoing a corporate governance review to set out a roadmap to
smoothly transition our board.
I would like to thank the Board of Directors, the entire Horizonte team
and all our advisors that have worked tirelessly throughout the year to
deliver the transformational funding package and overall progress of
our two projects. I would also like to thank the continued support from
our longstanding shareholders and welcome our new investors.
David Hall
25 March 2022
David Hall, Chairman
2021
This year we have laid the foundations for the establishment of a
significant nickel producing business, culminating in the completion of a
transformational funding package in late November of US$633 million.
This comprehensive funding package for Araguaia, our first project to
reach the construction phase, is an outstanding achievement for the
Horizonte team and one which very few junior mining companies can
claim. Through this process we have secured support from multiple
world class financial institutions which is testament to the quality of
the project and our team’s tenacity. These milestones have once again
been achieved against a backdrop of uncertainty and disruption because
of the Covid pandemic. The team in London and Brazil has continued
to navigate the ever-changing working environment productively and
most importantly, safely.
The health and well-being of our employees and wider team of course
remains our number one priority and is at the forefront of our strategy.
We are dedicated to providing a safe and productive workplace. Covid
is seemingly part of our everyday lives for the foreseeable future, we
therefore have implemented ongoing Covid management protocols
that we have implemented as we have returned to office working
and as we ramp up activity on site with early works and the start of
construction at Araguaia.
A transformational year
The securing of a comprehensive project funding package for Araguaia
has been the team’s focus for the past two years, this would have been
achieved in a shorter timeframe if we had not lost one year as a result
of the Covid pandemic. Whilst working to secure a traditional package
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BUILDING A SUSTAINABLE
BUSINESS
OUR VALUES ARE OUR
GUIDING PRINCIPLES
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Our purpose
informs our busines model and our strategic
objectives. Our values inform the behaviour and standards expected
of all our colleagues and associates. Together these enable us to work
towards our vision of becoming a globally significant producer of low-
cost, high-grade sustainably sourced nickel that delivers long-term
value to all its stakeholders. Our strong culture built from our core
values ensures all members of our team share our common purpose
and work hard to continually progress the company through hard
work, dedication, and entrepreneurialism in order for us to create a
modern, sustainable business.
The nickel Horizonte will produce will be used in stainless steel and
batteries, which is critical for the clean energy transition. Nickel
enables sustainable development for communities and countries
across the world.
Our culture is inclusive and supportive, encouraging all employees to
take ownership of their work, lead by example and be accountable
for their successes and failures. Proudly Brazilian, we promote local
employment wherever possible and provide continual training to
upskill our workforce.
In addition to local employment opportunities, we enrich our local
communities with employment through improved infrastructure
and social services and help for underprivileged members of society
through our social investment initiatives. These initiatives are often
implemented in conjunction with governmental bodies as we work to
achieve their goals and objectives alongside our own. Environmental
stewardship is a key area of this coalition and is key to long term sus-
tainable business.
We are focussed on producing low-cost,
low-carbon, sustainable nickel products,
profitably, to benefit our workforce,
local communities, host nation and
our shareholders.
VISION
To be a globally significant,
profitable producer
of sustainably
sourced
nickel
PURPOSE
Sustainable supply
of nickel to enable
the clean energy
transition
VALUES
Health & Safety
Commitement & Cooperation
Integrity & Respect
Responsibility &
Accountability
STRATEGY
Develop
Fund
Build
Produce
Health & Safety
Health, safety and well-being is at the
forefront of all our operational activities.
We are dedicated to assessing
risks
appropriately and implementing appropriate
measures to mitigate risks that could
potentially cause harm to our employees.
We understand the importance of a healthy
and happy workforce and are therefore
committed to protecting and promoting
all employee’s health and well-being. We
ensure each individual understands that
health and safety is their responsibility
whilst also instilling a culture of caring for
our colleagues.
Commitment & Cooperation
A united team is Horizonte’s greatest asset.
The Company is committed to helping each
employee reach their individual goals, and
the Horizonte team is united by the shared
goal of the Company’s overall success. We
achieve these goals and objectives through
hard work and cooperation. Open and
constructive communication is encouraged
amongst all employees, irrespective or role
or seniority in order to ensure continual
focus, efficiency and efficacy.
integrity and respect
Integrity & Respect
Operating with
is
critical to protecting and promoting our
reputation for best practice. We operate
with respect towards all people regardless
of their background, culture or lifestyle,
and we do so in a manner that is honest,
fair and ethical.
Responsibility & Accountability
We take responsibility for our decisions,
actions and outcomes as
individuals
and as a collective. We are receptive to
recognising our faults and open to advice
on how to improve our performance. We
achieve accountability
regular
and transparent communication with all
our stakeholders.
through
Sustainability & Innovation
Developing a sustainable business requires
a true understanding of the constantly
changing landscape in which we operate.
We strive to impact our employees, local
communities and other key stakeholders
positively whilst minimising any adverse
impacts on the natural environment. We
are therefore focussed on environmental
stewardship, social development and good
corporate governance. To achieve these
goals, we are open to
innovation and
technological advancements.
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OUR VALUES IN ACTION
COMMITMENT & COOPERATION
Igor Torres, Project Integration Lead
“We at Horizonte Minerals generate, manage and
communicate information in search of the best
results for ourselves, the community that hosts us
and our investors. We are committed to great results
that effectively use our resources. I have had the
privilege of participating since the beginning of the
Araguaia and Vermelho Projects, and it is amazing
and inspiring to see what has been achieved through
our commitment, cooperation and our attitude to
solve problems and never give up. We have already
achieved so many of our goals as a result of a united
and dedicated team, there are many more to come.
At Horizonte we turn dreams into a reality, with
first Nickel from Araguaia in Q1 2024 and then
Vermelho to follow!”
INTEGRITY & RESPECT
Wilma Pereira Fialho, Administration Assistant
“At Horizonte, we do our best to ensure all our
employees and contractors work with integrity &
respect towards themselves, towards the community
and other stakeholders. As a person who was born
in Conceição do Araguaia, in my opinion, Horizonte
Minerals is a great opportunity for those who want
to develop themselves. I can see that our managers
are engaged and committed to make our work
environment even more productive and supportive.
We are always learning, working with people from
distinct backgrounds, respecting them regardless
of their culture, religion or lifestyle. In fact, working
with such a diverse team make Horizonte even more
prepared to be a significant nickel producer.”
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BUSINESS MODEL
INPUTS
OUTPUTS
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MARKET FUNDAMENTALS
ASSETS
Global supply
Read about the uses of nickel in the clean energy
transition on pages 18-19
Tier 1 projects
Get an overview of our projects on pages 2-3
Our people
Read about our team on pages 4-5
Funding
Read about our strong financial position
on pages 26-27
Global demand
Read about the current nickel supply shortages
on pages 18-19
Commodity price
Read about the positive nickel price trend on
pages 18-19
INTEGRATED APPROACH
Good corporate citizen
Read about our commitment to sustainability
on pages 22-23
Good corporate governance
Read about our corporate governance
on pages 34-35
Stakeholder engagement
Read about our stakeholder engagement
on pages 24-25
Present a unique nickel investment opportunity
Increase our team’s capability
Deliver value to shareholders through
operational progress
Minimise our environmental footprint
Build strong relationships with our stakeholders
Implement carbon reduction initiatives from
project planning stage
Invest in our future
Maintain a strong balance sheet
DEVELOP
GOVERNANCE
FUND
OUR
BUSINESS
STRATEGY
BUILD
ENVIRONMENT
OUR
INTEGRATED
COMMITMENT TO
SUSTAINABILITY
COMMUNITIES
OPERATE
PEOPLE
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STRATEGY
Delivering quality work, on time, on budget, safely with
the support of our local communities will enable us to
deliver our long-term objective of delivering scalable
production of high-grade nickel.
Our vision is to be a globally significant, profitable producer of
sustainably sourced nickel to fulfil our purpose of supplying
sustainable metals to the enable the clean energy transition.
Horizonte will deliver this vision through our immediate strategic
objectives: focus on health and safety, integration of sustainability,
project development and financial security and our longer-term
strategic objective of delivering scalable production.
Stakeholder holder engagement is critical to our ongoing success.
Through continual, proactive engagement with all our stakeholders
we are able to ensure alignment between our strategic objectives and
the interests of our stakeholders. As part of our annual sustainability
reporting, we conduct a materiality assessment to assess the
changing priorities of our stakeholders and adjust our strategic
objectives accordingly. The interests of all our stakeholders are
considered in the strategic decisions we make across the business.
Please read our Sustainability Report for more information of our
materiality assessment and materials topics, in line with Global
Reporting Initiative principles.
STRATEGIC OBJECTIVES
PROGRESS
Focus on health and safety
The health, safety and wellbeing of all
our employees and contractors is our
top priority
Appointment of Health & Safety Manager
Increased health and safety reporting metrics
Adoption of 10 Golden Rules
Integration of sustainability
Sustainability is critical to our long-term
success. We are focussed on implementing
best practice sustainability standards across
all areas of the business
Project development
Progressing our two, tier one projects
through construction and into production is
central to our business model and allows us
to deliver value to our stakeholders
Financial security
Securing appropriate funding for the
development of our projects gives us
the financial security and flexibility to
successfully deliver our vision
Internal consultation on the value of
sustainability
Incorporation of ESG related metrics in all
employees personal development plans
Araguaia
~ Owner’s Lead Team recruited
~ 91% Owner’s Team recruited
~ Execution phase detailed in project execution schedule
~ Pre-production costs finalised
~ All environmental and licences obtained required for
construction
~ Environmental and social obligations in tracking system
and being deployed on schedule
Vermelho
~ 70% FS Owner’s team recruited
~ 70% FS work plan completed
~ Social and Environmental Impact Assessment progressed
~ $346.2 million senior debt package secured with BNP
Paribas, Natixis, Societe Generale, ING and SEK including
$146.2 million Export Credit Agency tranche with EKF
and Finnvera
~ $197 million equity finance completed including $71
million from La Mancha, $50 million from Orion Resource
Partners and $7 million from Glencore
~ Comprehensive funding package fully funds Araguaia
stage 1 with approximately US$100 million of contingency,
growth allowance and cost overrun funding allowance
~ $25 million royalty secured with Orion for the completion
of Vermelho feasibility study
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Safety Talk at our Conceição do Araguaia site
PERFORMANCE
497,581 injury-free hours
0 fatalities
254 safety briefings
Araguaia complies with
~ Brazilian regulation
~ IFC Performance Standards
~ Equator Principles
Araguaia
Construction ready with
early works underway
LONG TERM TARGETS
TRIF 4 or less
0 permanently disabling injuries
0 fatalities
100% of licence and permitting
obligations met
>95% of lender obligations met with no
material issues generated by issues
First production at Araguaia anticipated in
Q1 2024
50% ramp-up achieved with 6 months of first
metal production
Completion of Vermelho Feasibility Study and
advancement of permitting
Araguaia
US$633M funding package secured
100%, 10-year offtake secured with Glencore
Vermelho
US$25M secured for Feasibility Study
0 additional funds required for Araguaia
Stage 1 capex secured
Strong balance sheet maintained
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OUR STRATEGY IN ACTION
Integration of Sustainability - A Fully Automated
Sustainability System
Strong sustainability governance systems have been key
to Horizonte’s success. Over five years ago, we integrated
IFC Performance Standards and Equator Principles into
the Araguaia project. Three years ago, we published
our first standalone Sustainability Report using GRI
standards. Throughout 2021, the sustainability team fully
implemented the Integrated Management System (IMS),
which integrates all social, environmental, governance
and permitting requirements for our Brazilian licences and
international standards. With the help of ERM, Horizonte’s
IMS uses technologies such as M-Risk and Verde Guaia to
manage all aspects of sustainability.
Management and key sustainability staff have access
to real-time reports to view compliance against permits,
upcoming notifications, permit
renewal dates and
commitments with lenders to meet environment and
social agreements.
The IMS meets International Organization for Standardization
importantly, significantly
(ISO) requirements, but most
reduces our ESG risks and helps keep Araguaia on track in
meeting its commitments to all stakeholders.
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Safety and Wellbeing in Action
Horizonte has continued to operate since its inception with
zero fatalities and achieved another year of zero injuries,
taking us to 4 years injury-free at the end of 2021.
The focus throughout 2021 was to prepare the team and our
systems to move to construction-ready safety procedures.
The Company has built-out a health and safety team and
all are based at site to provide real-time oversight and
management of risks. With early works commencing, this
has given the team the opportunity to closely assess our
procedures and improve safety management.
We have developed a comprehensive safe work system that
will be rolled-out in H1 2022 ahead of major construction
works, including:
~ Safe Work Procedures for routine work
~ Safe work planning and permitting
~ Behavioural safety program including behavioural
observations to reinforce positive behaviours, and to
address at risk situations and behaviours
~ Layered audits of work procedures to coach and
improve effectiveness
~ 12 fatal risk control protocols and golden rules
~ Contractor supervisor and team member selection,
training and on-boarding process
~ Comprehensive Health & Safety contractor
management provisions
~ Integration of emergency response plans of EPCM into
Horizonte’s own Integrated Management System
life
While some countries are gradually adapting to
with COVID-19, the pandemic continues to exact a
in developing countries, such
heavy toll, particularly
as Brazil. Horizonte
is very proud of the diligence
shown by our employees and contractors, for each
other and for their
local communities, by adhering
to Horizonte’s strict COVID-19 protocol, prioritising
health controls, supporting vaccination programs and
supporting vaccination clinics near in our local community.
We continue to hold a record of 9 work-related
transmissions of COVID-19 at Horizonte.
Our project team has also embedded a range of controls
and contingencies for COVID-19 to ensure safe and
healthy operating environments are upheld throughout
construction of the Araguaia project.
Lucas Oliveira Magalhães, field assistant, working in the drilling campaign
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Strategic Report
Corporate Governance
Financial Statements
KEY PERFORMANCE INDICATORS
Strategy key:
Develop
Fund
Build
Operate
WE USE VARIOUS FINANCIAL AND NON-FINANCIAL
PERFORMANCE MEASURES TO HELP EVALUATE THE
ONGOING PERFORMANCE OF OUR BUSINESS.
LINKED TO OUR STRATEGIC OBJECTIVES, THE FOLLOWING
MEASURES ARE CONSIDERED BY MANAGEMENT TO BE
SOME OF THE MOST IMPORTANT IN EVALUATING OUR
OVERALL PERFORMANCE YEAR ON YEAR.
Core drilling sample
1. HEALTH & SAFETY
a. LTIFR
b. Fatalities
2. SUSTAINABILITY
a. Environmental incidents
b. Local employment
c. Social investment
3. FINANCIAL
a. Capital expenditure
b. Cash balance
US$145 k
US$24.8 m
US$210.5 m
0
0
0
0
0
0
0
0
0
50%
53%
43%
US$11 k US$25 k
US$8.19 m
US$5.7 m
US$7.2 m US$23 m
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
Relevance
We aim to provide a safe working
environment for all employees and
contractors. The lost time injury
frequency rate measures the number
of injuries per 1 million hours worked
that result in time lost from work
Link to Strategy
Link to Risks
7
8
9
Relevance
The safety of our employees and
contractors is our top priority. We
have a 0 fatality target.
Link to Strategy
Link to Risks
7
8
9
Relevance
Environmental stewardship is key to
our long-term success. We operate
in an environmentally conscientious
manner and minimise the impact
of our activities to aim for 0
environmental incidents
Relevance
We are committed to delivering
shared value to our local communities.
This is partly achieved through creating
employment opportunities for local
community members
Link to Strategy
Link to Risks
4
5
8
Link to Strategy
Link to Risks
5
7
Relevance
The support of the local communities
in the region of our operations is
critical. We seek to partner with our
communities to enrich the socio-
economic environment through
investment to relevant projects
Relevance
Capital expenditure reflects the
investment in operations and team
Link to Strategy
Relevance
We are focused on securing a
strong balance sheet to fund the
construction of Araguaia Stage 1
and maintain financial flexibility
Link to Strategy
Link to Strategy
Link to Risks
Link to Risks
5
7
8
2
4
5
7
8
Link to Risks
4
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MARKET OVERVIEW
The transition to a net-zero economy will be
metal-intensive
By the end of the November 2021 United Nations Climate
Change Conference (COP26), it had become clear that the climate
commitments made in Glasgow have entrenched the net-zero
target of reducing global carbon emissions as a core principle for
business. It also became apparent that the net-zero commitments
are outpacing the formation of supply chains, market mechanisms,
financing models, and other solutions and structures needed to
enable the world’s decarbonization pathway.
Raw materials are at the centre of decarbonisation efforts and
electrification of the economy as we move from fossil fuels to
wind and solar power generation, battery- and fuel- cell-based
electric vehicles (EVs), and hydrogen production.
Nickel’s role in the clean energy transition
Nickel has traditionally been known as a critical component in
stainless steel, two thirds of global nickel production go into its
manufacture. As the world transitions towards a green economy,
nickel’s role has begun to evolve, as its critical role in sustainable
energy systems and new battery technology has emerged.
Nickel plays a number of roles in the clean energy
transition, including:
~ 325M EVs expected to be in operation globally by 2040. A
60Kwh NMC battery needs 39kg of nickel
~ Carbon Capture & storage -200t of nickel required to capture
and store 1.5MT CO2 / pa
~ Nickel Improves strength & durability of wind turbines. Each
turbine requires, 2,000 kg of Nickel
~ Hydro-electric plants need durable nickel -rich stainless-
steel turbines. Global hydro-electric capacity expected to
grow 70% by 2040
~ Nickel alloys plan an important role in ensuring the integrity,
durability & long-term performance of nuclear power
stations. Global expansion plans: 50 under construction 100
on order/planned 300 proposed Nickel- containing alloys
prevent corrosion in geothermal energy generation
Nickel’s price performance surpassed
expectations in 2021
Kicking off 2021 on an already bright note after a 2020 that saw
prices fall sharply, nickel opened the year at US$17,344.
The properties of nickel facilitate the deployment of the multiple
clean energy technologies – geothermal, batteries for EVs and
energy storage, hydrogen, hydro, wind and concentrating solar
power. It is also necessary in nuclear energy technologies as well
as carbon capture and storage.
The reopening of economies after strict restrictions due to
COVID-19 supported prices in the first quarter of 2021 as
well. In Q2, following news from top producer Tsingshan that
eased concerns over a supply shortage, prices experienced a
steep decline.
Nickel provides a major cathode material in lithium ion batteries.
In nickel-containing stainless steel, nickel provides toughness,
strength and enhanced corrosion
resistance, significantly
increasing the end product’s life.
By late October nickel had surged to seven-year highs amid
concerns of limited supply - with multiple major producers
revising production guidance citing labour issues, adverse weather
and shipping issues - to meet resilient demand from economies
reopening as the pandemic retreated.
In January 2022, the nickel price had surged to its highest in
decades as stockpiles dwindled. Analysts noted that inventories
around the world were at a critical level and prices were starting
to reflect that.
Strategic Report
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Financial Statements
Accelerating battery demand will fundamentally
alter the market
2021 was an unprecedented year for the electric vehicle (EV)
market, 18.5% of all new cars registered in 2021 were either
hybrid plug-in or fully electric. In China new energy vehicle (cars
eligible for an EV subsidy) sales jumped 169% in a year. Many of
the world’s largest car manufacturers facilitating this trend, 2021
saw Ford, VW and Mercedes Benz all publicly committed to a full
transition to EVs.
Demand for nickel batteries has continued to increase, with OEM’s
looking to increase battery energy intensity. Car manufacturers
have adopted high-nickel content cathode chemistries at a
faster rate than anticipated. According to BMO Commodities
research nickel-cobalt manganese 811 (NCM) market share
is estimated to have reached 14% in 2021, compared to less
than 8% increase in 2020, with expectations that this trend will
continue in coming years at the expense of other cathodes. BMO
expects nickel demand from EVs to rise a further 60 Kt in 2022,
as battery manufacturers look to develop low cobalt batteries,
looking instead to higher nickel composition batteries. However,
the proportion of nickel-free LFP (lithium iron phosphate) battery
installed capacity has risen to over 25% of total market share in
2021, however LFP remains to be focused in China.
Growing demand in 2022
2022 is on track to be the first year that global nickel demand will
surpass 3 million tonnes. To put this in context, in 2000 demand
had not surpassed 1.1 million tonnes. The International Energy
Agency has forecasted that demand for nickel must grow 19-fold
by 2040 if the world hopes to achieve the targets set out by the
Paris agreement on climate change.
Already global nickel supply is falling short. In 2021 Nickel saw
a supply – demand deficit of roughly 180,000 tonnes, equating
to 6% of its total market size. Nickel had by far the largest deficit
when compared to other base metals in 2021. Early in 2022
nickel reached a ten year high of $22,745 per tonne, reflecting
depleted stockpiles in LME approved warehouses and official
Chinese stockpiles. In order to prevent stockpiles being raided
further supply will have to increase by at least 200kt this year.
In the next decade increases in supply are expected to originate
from Indonesia, BMO expects at 300kt increase in output this year,
however this heightened supply will be carbon intensive as it is
powered by coal-fired electricity used in nickel processing projects.
The stainless steel continues to be nickel’s main driver
Stainless steel, aided by a construction boom following the
pandemic has had a strong 2021, attaining a market volume of
almost 50,000 KMT in 2021. The market is projected to grow at
CAGR of 2.8% between 2022 and 2027. The stainless-steel market
is dominated by China, which saw a significant increase in demand
in 2021 adding almost 3Mt of product.
In terms of supply the industry is expected to contract in 2022 as
there is pressure on the Chinese stainless industry to curb output,
and look for 3% growth this year, slightly below the longer-term
norms. The nickel market is heavily influenced by stainless steel
demand, responsible for two thirds of nickel consumption. To put
demand in context a 2% swing in stainless steel demand has the
same impact on nickel, positive or negative, as a 16% swing in
battery demand.
Ferronickel processing equipment acquired from CBA (Votorantim)
Ferronickel processing equipment acquired from CBA (Votorantim)
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Environmental & Social
Horizonte’s environmental and social workstreams are critical to
our social licence to operate. As part of the financing due diligence
phase and in preparation for the construction of the Project, the
sustainability team has further de-risked Araguaia by completing a
number of management plans to ensure Araguaia remains compliant
with Equator Principles (IV) and IFC Performance Standards with
input by consulting groups ERM and Kienbaum.
The Company has permitted all infrastructure components of Araguaia,
including the award of construction licences for the transmission line
and the water pipeline in early 2021.
A full suite of social and environmental control plans have been
developed as part of Araguaia’s Brazilian environmental construction
licences, and a number of programmes have commenced prior to
construction. Some examples of work commenced include the
resettlement action plan, social communication programme, safety
improvements for school communities located along the PA-449
highway, and the Local Development Agenda programme.
VERMELHO
Whilst Araguaia has continued to be our focus for 2021, the Vermelho
nickel-cobalt continues to progress. In March 2021 we awarded the
contract for the Environmental & Social Impact Assessment (ESIA) to
Ramboll. Ramboll is a leading global consultancy firm with 300 offices
worldwide, including Belo Horizonte. Ramboll’s Impact Assessment
services are based on both commercial understanding and technical
rigour to deliver projects that are advanced, sustainable and provide
value to society. Horizonte has previously worked with Ramboll on
the hydrology for Araguaia.
The ESIA is an essential part of the permitting process for Vermelho
and expected to lead to the award of the Preliminary Licence. As
Vermelho is located within the Pará State, the technical agency
responsible for reviewing the Environmental Impact Study and
Report will be the Pará State Secretariat for Environment and
Sustainability, SEMAS.
Previous owner, Vale, conducted multiple environmental and social
studies and reached a positive construction decision in 2015. The
historical database created by Vale provides an excellent background
and basis of the new sustainability studies. Horizonte is also
optimising the engineering for Vermelho’s dry-stack residue storage
facility option. An additional benefit from the project resulting from
this optimisation is the production of a bi-product, kieserite fertilizer
which will be sold commercially into the Pará state agricultural market.
Strategic Report
Corporate Governance
Financial Statements
The integrated ESIA will reflect the current physical, biological and
social settings and will include, but is not limited to:
~ Water availability and quality
~ An air and noise baseline study
~ Soil quality
~ A flora and fauna inventory
~ Socio-economic considerations
~ Community health and safety
~ Resettlement
~ Cultural heritage
In addition to local permit studies, further social and environmental
impact assessments will be undertaken in line with International
Finance Corporation Performance Standards and the Equator
Principles (IV).
As part of the Araguaia financing process, we were also pleased to
secure $25 million for Feasibility Study for Vermelho. A dedicated
team is now working to expedite the project alongside Araguaia.
Outlook
Our comprehensive preparation work is a critical part of delivering
Araguaia on time, on budget and safely. Not only has Araguaia
undergone our own internal reviews and improvements but the
project has been subject to extensive due diligence by our lenders and
major investors. We therefore feel very confident in the robustness of
the project execution schedule and our ability to deliver it. Earlyworks
have been underway during the wet season and have continued in
the New Year with official start of site construction due to commence
as planned in Q2 in conjunction with the start of the dry season.
Construction at Araguaia will continue for the next two years with
first nickel anticipated for late 2023/early 2024.
During the construction phase at Araguaia, we will also be advancing
our plans for the development of stage two alongside the development
of Vermelho. In 2022, Horizonte has entered a new phase of the
Company’s journey with a significant increase in operational activity
on site and an increase in our workforce.
I am extremely privileged to have led the remarkable transition of
Horizonte from grass roots discovery to where we are today. Very
few junior companies reach construction phase of a tier one project,
let alone with a second tier one project following close behind. This is
a very exciting time for Horizonte as we work towards first production
and I would like to thank our team for the continued hard work
on this journey.
Ramboll will be completing new field campaigns in a Covid-19 safe
manner and is well serviced by its existing sustainability team in the
Pará state region.
Jeremy Martin
25 March 2022
OPERATIONAL REVIEW
~ Identify and partner with the best-placed Engineering,
Procurement and Construction Management (EPCM)
contractor to deliver the Project linked to the
ECA funding package;
~ Update and detail the Project Execution Plan to reflect
these inputs; and
~ Optimise the Operational Readiness Plan.
Key outcomes of the work include:
~ Prioritising procurement of linked process equipment
as ‘process island packages’ where possible, to reduce
interface risk;
~ Contract negotiations being well advanced with all
key vendors following the completion of a detailed
and rigorous assessment process of all technical and
commercial proposals received and subsequent proposal
optimisation process;
~ Competitive tenders completed and significant progress
made on the following key packages:
• Process equipment including crushers, conveyors, electrical,
dryer, kiln, dust collection and refinery;
• Electric furnace and calcine transfer system;
• Overland powerline and main electrical infrastructure EPC;
and
• Construction contracts, including bulk earthworks,
temporary construction infrastructure and services, and
civil works;
~ Updated market proposals for key opex inputs; and
~ Capital expenditure and operational expenditure remain in
line with the Value Engineering work.
Araguaia will be delivered according to an Engineering, Procurement
and Construction Management strategy in partnership with an
experienced EPCM contractor. Key Horizonte employees, the Owner’s
Team will integrated into the broader team with clear roles and
responsibilities. Throughout the year, the team in Brazil undertook an
extensive competitive tendering process across the process islands
to secure world class suppliers for the development of Araguaia.
Ahead of final contract awards our team has been working with these
suppliers during preparation phase to ensure seamless operational
readiness. Horizonte’s strategy to deliver this approach is centred
around four key areas:
~ Flowsheet design is based on a conventional process that
is well within the operating parameters benchmarked
throughout the industry. The design has been further
validated through extensive testwork and a continuously
operated pilot facility.
~ Use of tier one equipment suppliers and services providers
track records of successful ferronickel projects and other
major projects in Brazil.
~ Application of process islands, where equipment that is
linked together in the flow sheet is procured from one
vendor, to reduce interface risk and enable whole systems to
be optimised.
~ Creation of an owner’s team of experienced Brazilian
personnel, supported by an expert advisory panel with
decades of ferronickel project design, project delivery and
operations experience.
Jeremy Martin, CEO
ARAGUAIA
Our focus for 2021 was completion of the comprehensive Araguaia
funding project, progressing early works and finalising the project
execution schedule for project readiness.
Araguaia is fully permitted to start construction and early in the year
we secured the construction licence package for the development of
the power line for the project. The power line will connect Araguaia to
the national power grid and will cover the full power requirement for
the project at nameplate capacity. The approved package includes the
preliminary licence (Licença Prévia), the construction licence (Licença
de Instalação), and the related fauna and flora licences. These were
granted by the Pará State Environmental Agency, Secretaria de Meio
Ambiente e Sustentabilidade (‘SEMAS’). The licence package permits
the implementation of a 120km, 230KV power line, and respective
substation. The power supply will be hydroelectric which is a key
factor in the ability to produce a low CO2 per tonne of product, in line
with other Brazilian ferronickel producers, placing Araguaia in the
lowest half of carbon emitters globally for nickel production.
Based on the optimised scope and execution plan that was generated
by the value engineering work in 2020 through 2021 the team
focused on final preparations for project execution.
The objectives of this project readiness process were to:
~ Define the final process equipment specification and
suppliers that will be used by the Project, particularly the
electric furnace and rotary kiln;
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Road refurbishment work in Conceição do Araguaia
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SUSTAINABILITY REVIEW
However, it is important not to become complacent. We have
commenced recording of light vehicle incidents as we ramp-
up our activities at site and our health and safety risks are
increasing as we move towards early works and construction in
2022, with new risk exposures, such as working at heights. The
Company is implementing defensive driver training for all light
vehicle drivers in Q1 2022 and will be onboarding a new Health &
Safety Manager to build-out the team and implement a suite of
procedures ahead of construction works.
We are also proud to report 0 workplace transmissions of
Covid-19 during 2021, and this is largely thanks to a robust
and continuously updated Covid-19 protocol adhered
to by employees.
People
In Horizonte we say that, “we’re only as good as our team”.
We put our success down to two major factors: the first – quality
of our assets; the second – our incredible people who drive
everything that Horizonte does.
A motivated and dedicated team has always been the key to our
success. We have worked tirelessly to create a positive company
culture through the implementation and promotion of our core
values and our entrepreneurial spirit. Horizonte provides a safe,
stimulating workplace where all employees are treated fairly
and human rights are upheld. For that reason, throughout 2021,
Horizonte developed its first standalone Human Rights policy
and Whistle Blower policy. These are being rolled out in H1 2022.
Growing from a
junior explorer and project development
company into a tier 1 constructor and operator is challenging.
As our workforce grows considerably, we are conscientious
about maintaining our agile nature, whilst acquiring high
quality talent and building our systems that are fit for a major
mining company.
By the end of 2021, Horizonte had tripled its workforce, and
of our in-country workforce: over 90% are Brazilian, around
20% originate from our local communities and around 40%
are female. The Company implemented a suite of Human
Resource procedures in 2021 to care for our employees and
drive performance, including a Short-Term Incentive Program;
Employee Assistance Program; and a People Committee tasked
with attracting senior leadership talent.
Environment
Our commitment to the responsible production of premium
quality nickel tailored to suit customers’ requirements is well
aligned with the rapidly evolving needs of a customer-driven
world. Nickel is a key player in the sustainability-driven supply
chain. Throughout 2021, Horizonte built-out its environment &
permitting team, now with 10 full-time employees under the
leadership of Flavia Veronese. The team successfully renewed
the construction-licence for Araguaia and fully implemented the
Integrated Management System (IMS), which integrates all social,
environmental, governance and permitting requirements for our
Brazilian permits. The IMS reduces significant management
risk, by automating alerts to team members and managers for
permit renewals, submission dates, reports, notifications and
conditions. Whilst site activity is limited, the environmental team
has supported the land acquisition program, through ensuring
Katie Millar, Head of ESG and Communications
In 2021, we saw much of the world tested to its limits in
dealing with the continued struggles caused by the global
Covid-19 pandemic. I’m incredibly proud of how our team
across the UK and Brazil, came together to protect each other
and our communities as well as sustaining our social and
environmental programmes.
The sustainability and operational teams showed flexibility, agility
and resilience in advancing the Araguaia project to fully comply
with both Brazilian regulations and International Standards
(IFC Performance Standards and Equator Principles), which was
necessary to support the funding package for Araguaia.
Horizonte worked with governments, communities, training
institutions and communities, to pave the way for sustainable
regional economic development in the south-east region of
the Para State where we will operate the Araguaia project,
and where we are commencing the Feasibility Study for the
Vermelho project.
Health & Safety
Every employee and contractor should go to work knowing that
they will come home safely. We’re proud to report on another
outstanding year of safety, with 0 LTIs in 2021. The Araguaia
project has recently reached half a million LTI free hours. Keeping
health & safety at the forefront of our business is crucial,
particularly given the rapid increase in staff throughout 2021
(tripling of the Araguaia owners team) and going into a significant
ramp-up period with 2000 staff and contractors expected in the
peak of the Araguaia project in 2022/2023.
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Strategic Report
Corporate Governance
Financial Statements
that the Company has robust biodiversity action plans in place, to
ensure a net positive biodiversity impact and significant reserve
rehabilitation program, estimated to be over 2000 hectares of
new forest throughout the life of mine. In 2021, 4 springs were
rehabilitated and over 1500 native shrubs were grown to support
flora diversity in the region.
Social
Horizonte plans to go beyond our social licence to operate and
been seen as a partner-of-choice for our local communities. In
Conceicao do Araguaia, where the Araguaia project is located,
around half of the population lives below the poverty line and
the Porject has the ability to positively transform the standard
of living in this region. Our second project, the Vermelho project,
is located in Canaa dos Carajas, which is home to the Carajas
mining district, and Horizonte has the opportunity to set the bar
high for mining companies by implementing Good International
Industry Practice with a full suite of IFC Standards and Equator
Principles, and by partnering to further develop the region.
Horizonte made a significant economic contribution in 2021,
distributing almost BRL $38M (Brazilian Reais), including over
BRL$3M spent on taxes, over BRL$3.5M spent in the health,
safety, environment and community area, and over BRL$11M
on wages to employees and contractors. The Company invested
BRL$814,396.89 directly into community investment programs
in 2021. Community investment flowed into social programs
designed to bolster Covid-19 defences, including assistance
to over 300 vulnerable families and donations of over 10,000
medical items to Conceicao do Araguaia. Regional economic
programs were also supported, such as the flour house for
women and cacau farmers crop diversification project.
Throughout the past year, Horizonte has been building-out its
social team, with 7 full time employees expected to be in role by
the end of Q1 2022, including a dedicated social & resettlement
manager, social coordinator and resettlement specialist.
Governance
2021 saw the publication of our second standalone Sustainability
Report. This report was a huge achievement for the Company,
as it not only showcases our ESG achievements to date, but
also outlines the detailed materiality process undertaken
across multiple stakeholder groups, identifying 9 key areas of
materiality for sustainability in Horizonte. Additionally, the close-
out of 2021 saw the successful financing of the Araguaia project.
To obtain this level of commitment from world-renowned banks
and institutional investors, the Project Sustainability team
worked tirelessly to implement the full suite of IFC Performance
Standards and Equator Principles.
Horizonte aims to create long-term value for our shareholders.
To create this value, we embed sustainability value and economic
value in the business decisions we make.
Sustainability value goes beyond our social licence to operate
– it is our positive contribution to both society and the environment.
We measure our sustainability value through our achievements
in brining real and positive results to our employees, local
communities, broader society/economy, business partners, the
physical environment and our fauna & flora.
Horizonte commenced internal consultation on its Sustainability
Value platform in 2021 and this will be advanced throughout
2022. Through this platform, we hope to develop a pathway
to outstanding sustainability achievements, with clear Key
Performance Indicators across all 9 areas of materiality, including:
water, biodiversity, GHG emissions, sustainability frameworks
& standards, stakeholder engagement, employee health &
safety, community relations, land acquisition & resettlement
and social investment.
Horizonte is implementing ESG metrics across all employee
performance development plans, and is currently working with
the Board of Directors to strengthen governance measures,
with the implementation of a Board Sustainability Committee
anticipated in 2022.
Our Vision
Horizonte’s vision is to become a globally significant producer
of low-cost, sustainably sourced nickel. Reflecting on that
vision, I see Horizonte as a growing business, building talent
and delivering outstanding results to stakeholders despite
challenges.
This is a business with purpose, and we have built-out a team
like-minded entrepreneurial spirited people who work
of
collaboratively to develop
innovative solutions to complex
sustainability challenges. Nickel is a commodity of the future,
and we hope that by integrating purposeful sustainability
workstreams from the early onset of the Company, we have
placed Horizonte well to participate in the growing global
nickel market.
Katie Millar
25 March 2022
Mining technician Bruno and local farmer Daniel in the
neighbouring area of the Araguaia Project
Fauna monitoring, assessing the native species
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STAKEHOLDER
ENGAGEMENT
All members of the Board of Directors understand
the duties of directors under Section 172 of
the Companies Act 2006. All Directors act in a
manner, they consider in good faith, to promote
the success of the Company for the benefit of all
stakeholders and in doing so consider:
~ The likely consequence of any decision in
the long term
~ The interests of the Company’s employees
~ The need to foster the Company’s
business relationships with suppliers,
customers and others
~ The impact of the Company’s operations on
the community and the environment
~ The desirability of the Company maintaining
a reputation for high standards of business
conduct; and the need to act fairly between
members of the Company.
Horizonte promotes the sustainable development
of its two long mine life nickel projects to benefit
our employees, shareholders, communities and
the Brazilian government. Through continual
formal and informal engagement with all our
stakeholder groups, we have been able to
determine their perspective and priorities and
align these with our strategy and key business
objectives. With this knowledge and alignment,
the Board is able to consider a full range of
impacts on all stakeholder groups in its decision-
making process. The key strategic decisions made
by the Board during 2021 were:
~ Ongoing response to the COVID-19 pandemic
~ Appointment of Araguaia Lead Owner’s Team
~ Approval of US$633 million comprehensive
funding package for the construction finance
of the Araguaia Project
~ Integration of carbon emissions reduction
programme into the project execution plan,
ramp up and commercial operation
~ Changes to Board structure
The long-term strategic priorities, and plans to
achieve these, are set out in the Strategic Report.
The following table identifies our key stakeholder
groups, the rationale for our engagement, how
we engaged with them during the year, and the
consideration of each group in the key strategic
decisions made by the Board in 2021.
ENGAGEMENT RATIONALE & OBJECTIVES
KEY TOPICS
HOW WE ENGAGED DURING 2021
KEY DECISIONS MADE /ACTIONS TAKEN
Strategic Report
Corporate Governance
Financial Statements
EMPLOYEES
An engaged and dedicated workforce is our most important
asset. Their continued commitment to the Company is reliant on
us providing a safe and engaging workplace that ensures each
employee is heard, respected and is able to reach their potential
through continued support and development.
~ Team Resources
~ Training and
development
~ Health and
safety
INVESTORS
The support of our shareholders is essential to the development
of the Company. As we seek to develop a sustainable mining
company for the long-term, it is critical to continually attract
new long-term investors that support the strategic objectives
of the Company. In discussing our investor engagement we
are considering current shareholders, future equity investors,
strategic financial partners and debt providers. Our shareholders
and new investors want to see sustainable value creation.
We therefore understand the importance of good corporate
governance and risk management whilst promoting the strong
operational potential of our assets.
~ Operational
progress
~ Project
financing
~ Board and team
capability
COMMUNITIES
Trust, understanding and cooperation with the communities that
surround our projects is critical to maintaining our social licence
to operate. Community engagement informs better decision
making and aligns interests to ensure the long-term success of
our projects.
~ Employment
opportunities
~ Environmental
stewardship
~ Health and
safety
SUPPLIERS
Operating in trusted partnerships with suppliers ensures we
are not only able to deliver our projects on time and on budget
but it also critical in maintaining our reputation and integrity.
We aim to build long-term relationships with our suppliers and
work with individuals and companies that share our values and
complement our in-house expertise.
~ Contract
awards
~ Operational
progress
~ Project
financing
GOVERNMENT & CIVIL SOCIETY
We aim to create a new long-standing mining company in Brazil
with projects that span decades and generate value for all
stakeholders. The ongoing support from all government bodies
and civil society is critical to this development. We operate in
line with all international and national regulations and following
all permitting requirements. We value the importance of work-
ing collaboratively and productively with all relevant entities.
~ Employment
opportunities
~ Social initiatives
~ An open line of communication is maintained between all employees, senior
management and the Board.
~ Weekly team meetings are held and quarterly virtual all-company meetings
were held in 2021. Updates on the projects and business objectives are
presented and discussed. There is always an open forum for questions from
employees and an invitation for anonymous emailed questions if employees are
not comfortable raising questions publicly.
~ The Company has an HR function in the UK and Brazil and employees are
provided with a formal induction to the Company on commencement of
employment. This induction covers company values, policies and procedures.
~ The health, safety and well-being of our employees is our primary value.
Relevant safety training and meetings are conducted in order to ensure a zero
harm environment.
~ Employees were engaged as part of recruitment process to ensure
understanding of the growing company structure, integrate new
employees effectively and to provide reassurance of job security. Building
a strong, collaborative team is critical to the Company’s ability to
deliver operational success.
~ A new covid related protocol was implemented and communicated to all
employees and were relevant to their individual working environment.
Health & Safety is a core value.
~ ‘HZM with you’ an employee assistance programme was established to
provide employees with an anonymous hotline for them to discuss any issues,
professional or personal with professional advisors.
~ An online internal portal was set up as a centrally managed, up to date
resource base for all employees.
~ The senior management team holds regular one on one calls with our
~ Investors were engaged as part of the project funding package.
institutional equity shareholders and future equity investors.
~ A comprehensive technical team undertook multiple due diligence conference
calls with debt providers and strategic financial partners. Under non-disclosure
agreements the Company provided access to an update virtual data room.
~ We have ongoing dialogue with retail shareholders via our info@
horizonteminerals.com email address and our Investor Relations function
~ The CEO hosted a private investor focused webinar where investors were able
to ask questions.
~ The CEO, CFO and Investor Relations attended over 100 one on one virtual
investor meetings during the year where the topics of project updates, finance
updates, sustainability and corporate governance were discussed.
~ Our Annual General Meeting (AGM) provided an opportunity for shareholders to
raise concerns and engage with the Board.
~ Our website and social media channels are updated regularly to provide
investors with more insight into the Company and its progress.
~ We have a Community Relations coordinator who continually engages with local
communities on the issues of environmental stewardship, local employment
and resettlement.
~ Our Social Communication Programme provides multiple anonymous and free
to use channels in order for all community members to have the ability to ask
questions, report issues and provide feedback. This is monitored by our social
team and each enquiry is actioned.
~ In 2021 interactions with the community focused on employment opportunities,
local supply chain, land access, cultural heritage, health & safety and COVID-19.
Prior to the restrictions implemented due to the COVID-19 pandemic this
interaction was through face-to- face individual and group meetings.
Community engagement continued throughout the pandemic but was
conducted virtually.
Potential debt providers were engaged in a due diligence process to ensure
their confidence in the Araguaia project and the Company’s ability to deliver
it. The impact of taking on debt on existing shareholders in terms of dilution
and the Company’s balance sheet, and for new potential equity investors
and strategic financial partners was considered in terms of their role in the
full financing of the project, the merits this debt package brings and the
interconnected nature of the financing. The ability to finance the construction
of the Araguaia project is critical to the Company’s strategy of becoming a
major nickel producer. The Company balanced the differing requirements and
preferences of all investor groups in this decision.
~ Key senior appointments – investors were given confidence by the level of
senior talent the company has been able to attract in its ability to successfully
deliver the construction phase of Araguaia.
~ Board changes – in line with the company’s commitment to the QCA Code and
requirements of new major shareholders the company committed to a board
restructure and ongoing corporate governance review.
~ The decision not to allow site visits due to ongoing covid related restrictions
was mitigated by the creation of a more detailed virtual data room in order for
investors to conduct due diligence.
~ The Social Team regularly communicated with the communities regarding
the status of the project financing and anticipated completion in relation to
employment opportunities, resettlement and activity on site.
~ Multiple community focused videos were created and distributed via
WhatsApp to communicate the company’s work to date in the region, our
commitment to environmental and social initiatives and to educate our local
communities on what to expect from the construction phase of the Araguaia
project in terms of levels of activity in the area.
~ Maintaining the health & safety of our local communities and our
commitment to social contributions was upheld during the year through the
donation of medical supplies to support the vaccination effort.
~ New team members were introduced to the community in line with the
appointment of the Araguaia Lead Team.
~ All current and potential suppliers were kept up to date with regards to the
~ A competitive tendering process was conducted in H2 2021 with decisions
status of the project financing package and anticpate completion as it impacted
contact decisions being made with all equipment and service providers.
~ The senior management team holds regular calls with all engineering,
environmental & social and other relevant specialised consultancy firms in
respect to the development of our projects.
~ All suppliers are required to adhere to our Business Integrity Policy, which
includes anti-bribery and anti-corruption clauses, as well as our Code of
Conduct and operate under Non-Disclosure Agreements.
~ We are committed to improving the socio-economics of the area in which we
operate and are therefore committed to local procurement.
anticipated to be finalised in H1 2022. The company’s procurement strategy is
focused on securing world class partners to deliver the Araguaia project safely,
on time and on budget.
~ The progress and anticpated completion of the project financing was discussed
with key government personnel throughout the year to ensure they were up to
date with the Company’s progress.
~ Our senior management team both in the UK and Brazil present the Company’s
progress to relevant government department regularly, and when requested.
~ Our Country Manager and Head of ESG & Communications have developed
strong relationships with the relevant government officials to ensure the
Company receives the required permits.
~ The company discussed local employment opportunities and the activities
related to construction with the relevant government departments
~ The company collaborated with local government departments with respect
to ongoing Covid response measures and donations.
~ Relevant new Araguaia Lead Team members were introduced to relevant
government personnel to ensure the Company had multiple points of
proactive contact.
24
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
25
FINANCIAL 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 is able to profitably develop or dispose of its
exploration and development projects. The principal financial key
performance indicators (‘KPIs’) monitored by the Board concern
levels and usage of cash.
The four main financial KPIs for the Group allow it to monitor costs
and plan future exploration and development activities and are
as follows:
Year ended
31 December
2021
£
Year ended
31 December
2020
£
Loss before taxation
(9,670,803)
(2,385,937)
Cash and cash equivalents
156,186,302
10,935,563
Exploration & Mine
Development assets
50,037,783
36,769,424
Cash and cash equivalents
£156,186,302 £10,935,563
Fair value of derivative asset
3,672,924
1,756,553
2021
2020
Royalty finance
(33,016,624)
(22,053,341)
2.48%
5.9%
Net assets
170,106,826
21,410,702
Loss per share (pence)
0.568
0.157
Administrative expenses as a
percentage of Total assets
Funds raised to advance
Araguaia
Mine Development/Exploration
costs capitalised as intangible
assets during the year
£167M
—
£15,370,452
£6,117,940
KPI’s are not GAAP measurements and are not intended to be a
substitute for these measures. The KPI’s used by the Group may
not be the same as those used by other companies and so should
not be used as such.
Administrative expenses as a percentage of total assets have
decreased, as a result of financing secured during the year to
finance the Araguaia project construction and increased activity in
advancing the Araguaia project which was capitalised to the Mine
Development asset.
Exploration costs capitalised as intangible assets predominantly
relate to expenditure on the Araguaia project during 2021 as
a result of the value engineering work undertaken to advance
the project towards being construction ready. Including in this
amount is also capitalised borrowing costs as a result of the Orion
Financing arrangement.
During the current year £167 million (£20million in Q1 and
£147 million in Q4) was secured through equity fundraisers to
advance the Araguaia project. The £147million (approximately
US$197 million) raised in Q4 was part of the US$633 million
funding package concluded in December 2021 to finance the
construction of the Araguaia project.
Loss for the year
The loss for the year increased to £9,670,803 from £2,227,411
in 2020 primarily due to increased headcount and activity in
securing the financing for the construction of the Araguaia project,
the limit on the borrowings costs that could be capitalised to the
mine development asset (excess was therefore expensed) and an
overall loss on foreign exchange during the year due to volatile
markets and the depreciation of the BRL. Net finance cost has
increased to £4,043,794 compared to a net finance income of
£236,986 in 2021, due to the excess borrowing costs related
to the development of the Araguaia project that was expensed.
During the year interest of £5,248,379 (2020: £2,100,521) was
capitalised to the mine development asset.
The Group has continued to keep a tight control on its administrative
costs, but they are expected to rise as the Group increases its
headcount and progresses with its commencement of construction
at Araguaia. As a result of this the administrative expenses
increased during the year from £2,949,736 to £5,678,350.
The value of the Mine Development asset and intangible
assets has increased significantly during year due to the
additions
in preparing Araguaia for construction and the
capitalisation of interest.
Furthermore, total comprehensive loss attributable to equity
holders of £12,088,897 included loss on currency translation
differences of £2,418,094. This was due to the weakening of BRL
against both USD and GBP as at 31 December 2021, as compared
to 31 December 2020.
The weakening of the BRL during the period as a consequence of
the Covid pandemic has had a large impact on the carrying value
of the underlying mine development asset and intangible assets in
Brazil. It has however conversely had a positive impact on the cost
of certain operating costs and capital costs for item sourced in
Brazil. The effect on the economics of the project has therefore not
been negative as the revenue stream is to be USD denominated.
Strategic Report
Corporate Governance
Financial Statements
Cash and cash equivalents
The group held cash and cash equivalents of £156,186,302
compared to £10,935,563 in the prior year. The increase was a
result of funding of £147 million secured in December, before the
end of the financial year.
Royalty Liability
The $25 million royalty finance secured in 2019 has been
recognised as a liability and valued using the amortised cost
basis at £33,016,624 at 31 December 2021 (£22,053,341
at 31 December 2020). This funding is not repayable until the
Araguaia project enters into production and following that the
royalty payments are made at a variable rate of 2.25% potentially
increasing to 3.0% based upon the date that project finance
is secured and certain level of construction expenditure is
committed. The current assumed royalty rate is 2.95% compared
to 2.65% at the end of 2020. The royalty is due on revenue less
some associated costs on a quarterly basis and has been revalued
based on the expectation of the future royalty payments under
the agreement using the effective interest method. Included in
the agreement are certain embedded derivatives which can under
certain circumstances result in the Company having the ability
to buy back certain levels of the royalty, the buy-back price is
driven by the holder obtaining certain milestones on its return on
investment. The result of these options are a derivative asset
being recognised on the balance sheet at a fair value of £3.7 million
(2020: £1.8 million).
Intangible Assets & PPE
Intangible Assets & PPE, which comprise both the Araguaia
and Vermelho projects, have
increased to £50,037,783
as at 31 December 2021 as compared to £36,769,424 at
31 December 2020. The Group incurred additional expenditure
in the year, which included £10 million mainly in relation to
work undertaken in Araguaia as part of the advances of the
project towards commencement of construction; as well as
the capitalization of unwinding of the royalty liability totalling
£5 million.
There was also a foreign exchange revaluation
loss of
£2.4 million due the depreciation of the BRL. The exploration
assets of the business are recorded in the functional currency of
Brazil, the country in which they are located.
Simon Retter
Company secretary and CFO
25 March 2022
Horizonte employees Raimundo Pereira and Carla Aiala
monitoring air quality and rainfall.
26
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
27
Strategic Report
Corporate Governance
Financial Statements
IDENTIFYING
AND MANAGING RISKS
Identifying and managing risk across all areas of the business
is integral to Horizonte. A risk management process is in place
for assessing, mitigating and managing risks associated with
corporate and operational decisions.
The Board considers risk assessment to be important in achieving
its strategic objectives. The Board’s current assessment of the
principal risks are set out in the Strategic Report and are monitored
by the Board at their meetings.
Risk management framework
The Board is responsible for putting in place and communicating
a sound system to manage risk and implement internal control.
The Board has considered mechanisms by which the business
and the financial risks facing the Group are managed and reported
to the Board. The principal business and financial risks have
been identified and control procedures implemented. The Board
acknowledges its responsibility for reviewing the effectiveness of
the systems that are in place to manage risk.
The Board has delegated certain authorities around risk
management to the Audit Committee, which has its own formal
terms of reference. The Committee meets each quarter, at least
four times a year, to coincide with the annual audit, and the
publication of its financial results, to assess the effectiveness
of the Group’s system of internal controls. The Audit Committee
is chaired by David Hall and comprises only independent non-
executive Directors.
RISK ASSESSMENT PROCESS
Risk appetite
Exploration for and the development of mineral resources,
together with the construction and development of mining
operations in Brazil, are activities that involve high risk.
Therefore, Horizonte makes
informed decisions prior to
engaging in any associated activities which pose a significant
risk to the Group. Where activities are undertaken, appropriate
mitigations are put in place commensurate with the degree of
risk that is faced.
Emerging Risk
Horizonte considers emerging risk as part of the risk assessment
process within our risk management framework. An emerging
risk is one that could potentially impact the Group; howev-
er, the risk is not yet fully understood, limiting our ability
to fully assess the likelihood and impact of such risks.
Such risks are closely monitored, enabling us to im-
plement mitigations when necessary or appropriate.
As an emerging risk, the Group is aware of current
inflationary pressures being felt around the world,
REVIEW
but at present, given the Group is not yet in operation, it does
not consider this to be a material risk to the Araguaia project
economics. The current inflationary pressures exhibited on
the capital cost are not deemed to be unmanageable as a
significant portion of the capital expenditure budget relates to
equipment packages with fixed firm pricing that has already
been contracted at the date of this report. The Group has
signed a senior debt facility for US$346 million during the year
which is priced off LIBOR (or its successor) and will therefore
be exposed to changes in US dollar interest rates going forward.
Given the relatively low starting point of US dollar interest rates
(near record lows) the effect so far of any rises is not deemed
to be significant. Should interest rates continue to rise then
this will impact the interest payments due during both the
construction and operating phase and will reduce the
retained earnings. This risk is currently deemed to be
moderate. An example of a risk that has transitioned
from an emerging risk to a principal risk is the risk
relating to COVID-19, which is reflected in the
risk entitled “COVID-19” described below.
I
M
P
L
E
M
E
N
T
BOARD
AUDIT & RISK COMMITTEE
BOD has ultimate responsibility for risk
management. BOD receives reports & updates from
Board Committees and EC on key risks & mitigation
BOD delegates risk management responsibilites to
ARC. ARC monitors the effectiveness of the Group’s
risk identification, mitigation and controls
NICATE
ATE
NICATE
NICATE
A
U
U
U
M
M
M
M
M
M
CO
CO
CO
EXECUTIVE COMMITTEE
Executive Directors
Senior Management
OPERATIONS
Belo Office
CdA Office
EC monitors & facilitates the implementation of
effective risk management practices by
departmental management & ensures appropriate
risk reporting up and down the business
Operational management has ownership,
responsibility & accountability for directly assessing,
controlling & mitigating risks
MONITOR
MITIGATE
EVALUATE
IDENTIFY
28
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
29
Employees and contractor during our drilling campaign
PRINCIPAL RISKS
AND UNCERTAINTIES
BUSINESS RISKS
Risk and Impact
1. COUNTRY
2. FOREIGN CURRENCY
3. COMMODITY PRICE
4. FUNDING
5. BRIBERY AND CORRUPTION
Commodity prices are vol-
atile and are dependent
on macro global events. A
significant decrease in the
nickel price would nega-
tively impact the econom-
ics and therefore viability
of the Group’s projects.
The Group’s costs are
dominated
in a number
of currencies including US
Dollars and Brazilian Real.
The intrinsic volatility of
exchange rates give rise
to an ongoing significant
probability of occurrence
of an adverse exchange
rate fluctuation. The im-
pact of such a fluctuation
can be large across calen-
dar years.
The UK Bribery Act places
onerous requirements on
UK companies to demon-
strate the effectiveness
of
anti-bribery
their
measures.
Failing to implement ade-
quate systems to prevent
corruption
bribery and
could result
in prosecu-
tion of the Company and
its officers.
The successful develop-
ment of the Group’s proj-
ects requires significant
investment. The
capital
Group currently sources
finance through the issue
of additional equity capital,
debt and royalty agree-
ments. The Group does
not generate revenues and
is therefore reliant on its
cash resources and obtain-
ing additional financing to
fund its operations, should
the cash resources deplete
and should there be a lack
of available financing al-
ternatives the Group may
find it difficult to fund its
working capital.
or
but
The Group’s operations
are located in Brazil. There
may be potential adverse
operational and financial
impacts from changes in
political, economic,
the
regulatory
fiscal
circumstances
in Brazil.
Horizonte has operated
in Brazil
for over 10
years however, it remains
subject to uncertainties,
not
including
limited to, changes
in
policies or the personnel
administering
them,
appropriation of property
without fair compensation,
cancellation
or
modification of contract
rights, royalty and tax
increases and other risks
arising out of
foreign
governmental sovereignty
in which
over the area
these
are
conducted.
Country risk is s factor
determining
the
economics and viability of
our projects,
Increasing
country risk may have an
impact on our operational
performance and financial
results.
operations
Strategic Report
Corporate Governance
Financial Statements
2. FOREIGN CURRENCY
~ Risk management
programme in
place that seeks to
limit the adverse
effects of these
risks on the financial
performance of the
Group. Details of the
Group’s financial
risk management
objectives and
policies are set out
in note 3 to the
Financial Statements.
1. COUNTRY
~ Brazil has a stable
political frameworks
and actively supports
foreign investment.
~ Brazil has s a
well-developed
exploration and
mining code with
proactive support for
foreign companies.
~ The Group
maintains proactive
relationships with
relevant national and
local government
departments.
~ Horizonte continually
monitors and
developments in
the national political
environment.
Mitigation
3. COMMODITY PRICE
~ The strong
4. FUNDING
~ The Group has
economics of the
Group’s projects
allow for relatively
low nickel prices.
~ The Board and senior
management team
continually monitors
the nickel price and,
more importantly
for the Group, the
long term outlook for
nickel.
secured a $633m
funding package for
the development
of Araguaia which
includes £100m of
cost over-run, growth
and contingency
allowance.
~ The Group secured
a $25m royalty
agreement for the
Vermelho Feasibility
Study
~ The Group maintains
strong relationships
with shareholders
and lenders
~ The Group
has a ongoing
investor relations
programmes
targeting new
investors
~ The CFO and Head
of Finance manage
and review all Group
budgets.
5. BRIBERY AND CORRUPTION
~ We prohibit bribery
and corruption
in any form by
all employees
and by those
working for and/
or connected with
the business. Our
executive officers
are responsible for
anti-bribery and
corruption matters
and, with the
support of the Board,
implements business
integrity policy.
~ The business
integrity policy
& programme
focusses on training,
monitoring, risk
management, due
diligence and regular
review of policies
and procedures.
Employees are
expected to report
actual, attempted
or suspected
bribery to their line
managers or through
our independently
managed confidential
reporting process,
which is available to
all staff as well as
third parties.
Risk Movement
1. COUNTRY
2. FOREIGN CURRENCY
3. COMMODITY PRICE
4. FUNDING
5. BRIBERY AND CORRUPTION
Unchanged - There
have been no significant
changes to the
assessment of the risk.
Unchanged - There
have been no significant
changes to the
assessment of the risk.
Decreased – nickel price
increased 30% in 2021
Decreased – significant
funding secured during
2021
Unchanged - There
have been no significant
changes to the
assessment of the risk.
Daily health and safety talk
30
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
31
Strategic Report
Corporate Governance
Financial Statements
SUSTAINABILITY RISKS
9. HEALTH AND SAFETY
Risk and Impact
10. COVID-19
~ Mine sites are, by their nature, dangerous places to
work particularly due to the use of heavy machinery.
Inappropriate use of heavy machinery or the failure to wear
appropriate PPE and follow health and safety protocols
may lead to serious injuries or loss of life.
~ During the period of these financial statements there has
been an ongoing significant global pandemic which has
had significant knock on effects for the majority of the
world’s population, by way of the measures governments
are taking to tackle the issue. This represents a risk to the
Group’s operations by restricting travel, the potential to
detriment the health and wellbeing of its employees, as
well as the effects that this might have on the ability of
the Group to finance and advance its operations in the
timeframes envisaged.
9. HEALTH AND SAFETY
Mitigation
10. COVID-19
~ Stringent health and safety policies
~ Regular health and safety briefings
~ Regular health and safety inspections
~ Ongoing health and safety training mandatory for all
~ Enhanced health and safety measures
~ Use of Covid appropriate personal protective equipment
~ Frequent Covid testing
~ Implementation of rotational teams to limited number of
employees and contractors
~ Creation of 10 Golden Rules in respect to health and safety
employees in the office if necessary
~ Home working when necessary
in preparation for construction phase at Araguaia
9. HEALTH AND SAFETY
Risk Movement
10. COVID-19
~ Unchanged – The Company maintained its 0 serious
~ Reduced – Vaccination rollout allowed for a return to office
injuries or fatalities record
working in 2021
This Strategic Report was approved by order of the Board on 25 March 2022.
Simon Retter
Company secretary and CFO
25 March 2022
PRINCIPAL RISKS & UNCERTAINTIES
CONTINUED
OPERATIONAL RISKS
Risk and Impact
6. PERMITTING
7. MINERAL RESOURCES STATEMENT
8. PEOPLE
The Group’s current and future operations
will require approvals and permits from
various federal, state and local governmental
authorities, and such operations are and
will be governed by laws and regulations
governing prospecting, development, mining,
production, taxes, labour standards, health,
waste disposal, toxic substances, land
use, environmental protection, mine safety
and other matters. There is no assurance
that delays will not occur in connection
with obtaining all necessary renewals of
such approvals and permits for the existing
operations or additional 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 appropriate 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
property or obtain all required permits on
reasonable terms or on a timely basis.
The Group’s reported resources and reserves
are only estimates. No assurance can be
given that the estimated resources will be
recovered or that they will be recovered at the
rates estimated. Mineral reserve and resource
estimates are based on limited sampling and
as a result are uncertain because the samples
may not be fully representative of the full
resource. Mineral resource estimates may
require revision (either up or down) in future
periods based on further drilling or actual
production experience.
Any future resource figures will be estimates
and there can be no assurance that the
minerals are present, will be recovered or that
they can be brought into profitable production.
Furthermore, a decline in the market price
for natural resources, particularly nickel,
could render reserves containing relatively
lower grades of these resources uneconomic
to recover.
The Group is dependent upon its executive
management team. Whilst it has entered
into contractual agreements with the aim
of securing the services of these personnel,
as well as a long-term incentive plan
comprising options and milestone incentives,
the retention of their services cannot be
guaranteed. The development and success
of the Group depends on the ability to recruit
and retain high quality and experienced
staff. The loss of service of key personnel
or the inability to attract additional qualified
personnel as the Group grows could have
an adverse effect on future business and
financial conditions.
6. PERMITTING
~ The Group maintains cooperative and
proactive relation with all relevant
government departments, and adheres
to all required permitting process and
title requirements.
Mitigation
7. MINERAL RESOURCES STATEMENT
8. PEOPLE
~ Resource and Reserve estimates
have been prepared by a team
of qualified specialists following
guidelines of NI 43-101, an
international recognised reporting
code verified by independent,
qualified consultants.
~ Significant recruitment programme
undertaken in Brazil
~ New role of Head of Projects
created and filled
~ Araguaia Owner’s Lead Team
recruited
~ Additional support added to London
corporate office
~ Formal Board nomination
committee created
Risk Movement
6. PERMITTING
~ Reduced – power line licence for the full
commercial power requirement for the
Araguaia project received in 2021
7. MINERAL RESOURCES STATEMENT
8. PEOPLE
~ Unchanged - There have been no
~ Reduced – multiple senior hires
significant changes to the assessment
of the risk.
made during 2021
32
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
33
Ferronickel processing equipment acquired from CBA (Votorantim).
CORPORATE GOVERNANCE
NOTE FROM THE CHAIRMAN
Introduction
is committed to good corporate governance and
Horizonte
accountability to all stakeholders. We believe robust governance
improves performance and mitigates risk and is therefore an
important factor in achieving the medium to long-term success of
the Company.
Horizonte’s primary listing is on the London Alternative Investment
Market (AIM). The Company abides by the AIM rule 26 regulation
in respect to reporting and has therefore chosen to adhere to the
Quoted Company Alliance’s (QCA) Corporate Governance Code for
Small and Mid-Size Quoted Companies.
In Brazil the Company has been a member of the Brazilian
Association of Mineral Exploration Companies (ABPM) since
2013 and in 2020 it became a member of the Brazilian Mining
Institute (IBRAM).
Creating a culture of good governance is led from the top, by
Horizonte’s Board, and is cultivated in every part of the organisation.
Evolving the Company’s corporate governance is a key part of the
Company’s transition. We have therefore committed to a corporate
governance review and will be reporting on subsequent changes in
2022 and beyond.
David Hall, Chairman
Strategic Report
Corporate Governance
Financial Statements
Our Approach
In line with the Company’s development and long-term strategic
objectives, Horizonte complies with the QCA Corporate Gover-
nance Code for Small and Mid-Sized Companies. Our QCA Code
disclosures within this Annual Report are summarised in the ta-
ble below. Full details of how we have applied each of the ten prin-
ciples of the QCA Code can be found in the Governance section of
our website www.horizonteminerals.com/uk/en/governance/
The Board meets regularly to determine the policy and business
strategy of the Company and has adopted a schedule of matters
that are reserved as the responsibility of the Board.
inside
The Company has a policy on share dealing and confidentiality
of
information for persons discharging managerial
responsibilities and persons closely associated with them, which
contains provisions appropriate for a company whose shares
are admitted to trading on AIM (particularly relating to dealing
during close periods in accordance with Rule 21 of the AIM Rules
and MAR) and the Company takes all reasonable steps to ensure
compliance by the persons governed by such policy.
The Board continues to monitor its governance framework on an
ongoing basis.
The Board considers that there is an appropriate balance between
the Executives and Non-executives (both independent and non-
independent) and that no individual or small group dominates the
Board’s decision making.
The Board has reserved the following matters for sole approval
by the Board:
~ Review and approval of the Company’s strategic plan
~ Review and approval of the Annual operating plan and
financial budget, including any changes during the year
~ Establishment of expenditure limits and
approval of exceptions
~ Hiring, review and compensation of CEO and CFO
~ Director recruitment
~ Appointment of Chairman
~ Appointment of Committee Chairmen and Committee
members
Contractors working on the rescue of archeological pieces from the
area where the transmission line will be built (Araguaia Project)
The QCA Corporate Governance Code
Principle
Establish a strategy and business model which promotes long-term value for shareholders
Seek to understand and meet shareholder needs and expectations
Disclosure within
this report
See pages 12-13
See pages 24-25
Take into account wider stakeholder and social responsibilities and their implications for long-term success
See pages 22-23
Embed effective risk management, considering both opportunities and threats, throughout the organisation
See pages 28-31
Maintain the board as a well-functioning, balanced team led by the chair
See pages 36-39
Ensure that, between them, the directors have the necessary up-to-date experience, skills and capabilities
See pages 40-41
Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
See pages 40-41
Promote a corporate culture that is based on ethical values and behaviours
Maintain governance structures and processes that are fit for purpose and support good decision making
by the board
See pages 6-9
See pages 34-35
Communicate how the company is governed and is performing by maintaining dialogue with shareholders and
other relevant stakeholders
See page 42
David Hall
25 March 2022
Employee wearing personal protection equipment (PPE) for working at heights
34
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
35
Strategic Report
Corporate Governance
Financial Statements
OUR CORPORATE GOVERNANCE
STRUCTURE
Board
The Board of Horizonte is responsible for setting the vision and
strategy for the Company to deliver value to all stakeholders by
effectively putting in place its business model.
Chairman
is to lead the
The primary responsibility of the Chairman
Board effectively and to oversee the adoption, delivery and
communication of the Company’s corporate governance model.
The chair has adequate separation from the day-to-day business
to be able to make independent decisions. Save in exceptional (and
well justified and explained) circumstances, the Chairman should
not also fulfil the role of Chief Executive Officer.
CEO
The Company’s CEO is charged with the delivery of the business
model within the strategy set by the Board. The CEO works with
the Chairman and NEDs in an open and transparent way and keeps
the chair and NEDs up-to-date with operational performance,
risks and other issues to ensure that the business remains aligned
with the strategy.
Non-Executive Directors
The Company’s NEDs participate in all board level decisions and
play a particular role in the determination and articulation of
strategy. The Company’s NEDs provide oversight and scrutiny
of the performance of the executive directors, whilst both
constructively challenging and inspiring them, thereby ensuring
the business develops, communicates and executes the agreed
strategy and operates within the risk management framework.
Remuneration Committee
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 recommends
the allocation of share options for the Board to approve 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 Group.
Audit Committee
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 Group is properly measured and
reported on and for reviewing reports from the Group’s auditors
relating to the Group’s accounting and internal controls.
Nomination Committee
In December 2021, the company established a formal nomination
committee comprising Jeremy Martin, Owen Bavinton and William
Fisher. The committee is responsible for finding and assessing
appropriate candidates for the Board in line with the company’s
evolving required skillset of mine building and production. The
committee will also develop a formal succession plan.
Contractors performing flora monitoring
36
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
Ferronickel processing equipment acquired from CBA (Votorantim).
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
37
BOARD OF DIRECTORS
Strategic Report
Corporate Governance
Financial Statements
DAVID HALL,
NON-EXECUTIVE CHAIRMAN
JEREMY MARTIN,
CHIEF EXECUTIVE OFFICER
OWEN BAVINTON,
NON-EXECUTIVE DIRECTOR
ALLAN WALKER,
NON-EXECUTIVE DIRECTOR
SEPANTA DORRI,
NON-EXECUTIVE DIRECTOR
WILLIAM FISHER,
NON-EXECUTIVE DIRECTOR
David has over 30 years of experience in
the exploration and mining sector and
has worked on exploration projects and
mines in over 40 countries. From 1992,
David was Chief Geologist for Minorco,
responsible for Central and Eastern
Europe, Central Asia and the Middle East.
In 1997 he moved to South America to
consult to Minorco in the region, and
subsequently
Exploration
became
Manager for AngloGold South America
in 1999. David 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 joint ventures in Ecuador and Colombia.
More recently David was the Executive
Director and Operations Director of
Minmet, where he led the divestment
of Minmet’s exploration assets in the
to GoldQuest
Dominican Republic
Mining Corporation. David was also the
founder of Stratex International Plc, that
discovered the Oksut gold deposit now in
production with Centerra Gold.
Qualifications
Mr. Hall is a graduate in geology from
Trinity College Dublin and holds a Mas-
ter’s Degree in Mineral Exploration from
Queen’s University, Kingston, Ontario.
Mr. Hall is a fellow of the Society of Eco-
nomic Geologists and EuroGeol.
Jeremy has over 20 years of experience
in the industry. He has worked in South
America, Central America and Europe,
where he has been responsible for
exploration programmes,
grassroots
resource
mine
and
definition
development and operation.
In 2011
Jeremy founded Rathdowney Resources
which identified, acquired and advanced a
portfolio of zinc assets in Ireland and was
listed on the TSX-V. He was the Founding
Director of MedGold Resources, listed on
the TSX, developing gold targets Spain,
Portugal and Serbia before founding Fast
Net Oil & Gas, an AIM listed alternative
energy company. Jeremy was a Founding
Director of Horizonte Minerals in 2006
before becoming CEO in 2010, he has led
the company through the discovery and
consolidation of Araguaia through to the
construction stage.
Qualifications
Mr. Martin holds a degree in Mining Geol-
ogy from the Camborne School of Mines,
and a Master's Degree in mineral explo-
ration from the University of Leicester.
He is a member of the Society of Eco-
nomic Geologists and the Institute of
Mining Analysts.
Owen has over 45 years of diverse
experience in the minerals exploration
and mining sector across multiple
jurisdictions. After
commodities and
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 Owen was Chief
Executive Officer of Aredor Guinea
SA. In 1992 he joined Anglo American,
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.
from
from
Qualifications
Dr. Bavinton graduated
the
University of Queensland in Geology in
1969, holds a Master’s Degree in Mineral
Exploration
Imperial College,
London and a PhD in Economic Geology
from ANU, Canberra, Australia.
He is a fellow of the Society of Economic
Geologists, the Association of Applied
Geochemists and
Institute of
Materials, Mining and Metallurgy.
the
responsible
the energy,
investment banking and
Allan has over 35 years of experience
in
fund
management, primarily
focused on
project finance in the natural resources
sector and private equity in emerging
markets. He has extensive contacts
in
infrastructure and
resources sectors worldwide, as well
as with governments, multilateral
agencies and
regional development
banks. Allan is currently a consultant
with UK Department for International
Trade, where he
is Head of Project
Finance. Previously he was with Masdar
in Abu Dhabi, as Executive
Capital
Director,
for managing
the third- party private equity funds
management business for Masdar, the
Abu Dhabi government’s clean energy
and sustainability company. Prior to that
he founded (in 2005) and ran a similar
private equity fund for Black River Asset
Management (UK) Limited, an indirectly
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 markets 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 seven years
covering Latin America. He also spent
three years in the energy group of ING
Barings in New York.
Qualifications
Mr. Walker graduated 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.
of
for
In her capacity as Vice President,
Corporate
Teck
Development
Resources since late 2018, Ms. Dorri is
identification and
responsible for the
pursuit of external growth opportunities
and providing support
internal
growth initiatives. In earlier roles, Ms
Dorri was Vice President, Corporate and
Stakeholder Development at Teranga
Gold, General Manager, Corporate
Development at Xstrata Nickel, and Vice
President, Investment Banking, Metals
and Mining Group at Merrill Lynch
Canada. She brings to the role 15 years
of experience in mining and metals in
the areas of corporate development,
financial and investment banking.
Qualifications
Ms. Dorri is a Canadian Chartered Profes-
sional Accountant and holds a Bachelor of
Accountancy and a Master of Accountan-
cy, both from the University of Waterloo,
and a Master of Business Administration
from the London Business School.
(Bill) has extensive
industry
William
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.
Qualifications
Mr. Fisher graduated as a geologist
in 1979
38
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
39
Strategic Report
Corporate Governance
Financial Statements
Due to the ongoing impact of Covid on the ability of large groups
to meet, the majority of the Board meetings for 2021 were
undertaken remotely by teleconference. The AGM was held
with a minimum attendance due to the ongoing restrictions on
gatherings under legal direction as a direct result of Covid.
The audit committee met quarterly during the year to consider
the Audit planning report and Audit completion report presented
by the auditors regarding the year end audit process. The year
end audit findings were focused on the key areas identified
during the planning process, the main items being:
~ Internal controls and management override
~ Carrying value and impairment of intangible exploration and
evaluation assets
~ Accounting for the royalty finance agreement
~ Assessment recognition of contingent consolidation
~ Going concern
The audit committee were in agreement with all the findings
and recommendations.
The remuneration committee met twice during the year to
consider the remuneration levels of the board and key officers
of the company, to consider and approve the basis of the long
term incentive plan and to consider and award options to key
members of the team.
Evaluating Board Performance
In accordance with best practice and the Code, the Board
undertakes an annual formal evaluation of its performance and
effectiveness, and that of each Director and Committee. This
evaluation is conducted by way of a questionnaire from the
Chairman, co-ordinated by the Company Secretary and concluded
by Chairman interviews where necessary. In addition, the Non-
Executive Directors met, informally, without the Chairman
present and evaluated his performance. The Board currently
considers that the use of external consultants to facilitate the
Board evaluation process is unlikely to be of significant benefit to
the process, although the option of doing so is kept under review.
The Chairman has stated that he values this annual evaluation
opportunity and considers it to be key to his role in creating an
effective Board. He has reported that the Board was satisfied
that the Board was effective and well run, there were therefore
no recommendations and none in the prior year.
BOARD OF DIRECTORS
CONTINUED
Board Composition
The Board comprises a group of experienced Directors with
a diverse skillset relevant to the development of a mining
company. Each Director has a wealth of experience and depth
of knowledge in the mining industry and complementary fields
including law, business development and capital markets. This
diversity of skills and experience across multiple jurisdictions
and professional disciplines provides the Company with effective
leadership and direction. Each Director keeps their skillset
up to date through a combination of continual professional
development and attendance at seminars and conferences
relevant for the industry Horizonte operates in. All Directors
retire on rotation at regular intervals in accordance with the
Company’s Articles of Association.
We understand the importance of an independent board and this
independence is constantly reviewed. Of the current six members:
one Executive Director and five Non-Executive Directors: Mr
Owen Bavinton, Mr William Fisher and Mr Allan Walker are
considered independent despite several of these members
holding shares or options in the Company. Due to Horizonte’s
size and the nature of junior exploration companies the Company
deemed it acceptable to remunerate directors with options
as the Company historically did not have sufficient financial
strength to attract the required depth in experience from board
directors. The shareholdings held by the directors have been
acquired on the market over the years and so represent arms-
length transactions and align their interests with shareholders.
Their shareholdings are also relatively small and are not deemed
large enough to distort any independence.
The following table highlights each Directors core competencies relevant to the successful development of the Company:
Project
Development
Project
Execution
Business
Development
Governance
Capital
Markets
Sustainability
Brazil
Financial
David Hall
Jeremy Martin
Owen Bavinton
Allan Walker
Sepanta Dorri
William Fisher
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Attendance at Board Meetings
Board Meeting date
David Hall
Jeremy Martin
Allan Walker
Sepanta Dorri
Owen Bavinton
William Fisher
Present
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
N
Y
N
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
N
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
N
8 February 2021
18 February 2021
26 February 2021
11 March 2021
22 April 2021
12 May 2021
17 May 2021 (AGM)
1 July 2021
11 August 2021
26 August 2021
27 September 2021
28 October 2021
4 November 2021
23 November 2021
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
40
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
The remuneration is determined in accordance with the Articles of
Association. When determining executive director remuneration
policy and practices, the Company’s remuneration committee
addresses the following:
~ Clarity – remuneration arrangements are transparent
and promote effective engagement with shareholders
and the workforce
~ Simplicity – remuneration structures avoid complexity and
their rationale and operation are easy to understand
~ Risk – remuneration arrangements ensure reputational
and other risks from excessive rewards, and behavioural
risks that can arise from target-based incentive plans, are
identified and mitigated
~ Proportionality – the link between individual awards,
the delivery of strategy and the long-term performance
of the Group should be clear. Outcomes do not reward
poor performance
~ Alignment to culture – incentive schemes drive behaviours
consistent with company purpose, values and strategy.
Support to Directors
The Board has the full support of the Company secretary.
The Board receives regular and timely information of the
in order
Company’s operational and financial performance
to perform this function. Relevant, detailed information is
circulated to all Directors ahead of Board and Committee
meetings. The Company Secretary is responsible for keeping
the Board up to date on its responsibilities in compliance with
relevant regulations.
The Board and Culture
The Board believes that the promotion of a corporate culture
based on sound ethical values and behaviours is essential to
maximising shareholder value.
Horizonte's company culture is consistent with its objectives,
strategy and business model. The Board regularly meets and
monitors the business and its stakeholders to ensure the values
and strategy are aligned with the company’s internal culture. The
Directors act with integrity, lead by example, and promote the
desired culture.
We believe that transparency and ethical behaviour are central
to any successful company and undertake all development with
respect to the environment and neighbouring communities.
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
41
BOARD OF DIRECTORS
CONTINUED
Shareholder Engagement
The Board attaches great importance to providing shareholders
with clear and transparent information on the Company’s
activities, strategy and financial position. Communication with
all shareholders is predominately led by the CEO and CFO, but the
Chairman and non-executive directors provide additional points
of contact for shareholders, particularly at the Company’s AGM.
We value the views and feedback of our shareholders and these
are often discussed as a collective during board meetings, no
significant actions or feedback were reported during the year.
Further information on our shareholder engagement can be
found in the stakeholder engagement section on pages 24-25.
Material information in relation to the Company is made publicly
available via the London Stock Exchange’s Regulatory News
Service (RNS) and via the System for Electronic Document
Analysis and retrieval (SEDAR) in Canada.
Details of our shareholder engagement during the year can be found in the following table.
Q1
Q2
Q3
Q4
~ Araguaia operational
update
~ Publication of
Sustainability Report
~ Interim results
~ BRR and Proactive Investor
video interviews with CEO
and Head of ESG
~ CEO, CFO and Investor
Relations undertook
investor roadshow
including current
shareholders in conjunction
with US$197m equity
financing
~ Q3 Results
~ Completion of US$633m
Araguaia funding package
~ BRR and Proactive Investor
video interviews with CEO
~ CEO, CFO and Investor
Relations undertook
investor roadshow
including current
shareholders in
conjunction with US$25M
financing
~ CEO and Investor
Relations attendance at
BMO Metals and Mining
Conference (virtual)
~ CEO attendance at
Brazil-Canada Chamber of
Commerce at PDAC event
(virtual)
~ Multiple operational
updates
~ Quarterly financial results
~ BRR and Proactive
Investor video interviews
with CEO
~ FY20 Results
~ Publication of Annual
Report
~ Annual General Meeting
~ CEO hosted private
shareholder focussed
webinar with question and
answer session
~ Q121 results
~ Araguaia financing update
~ CEO, CFO and Investor
Relations attendance at
121 Mining Investment
APAC conference (virtual)
~ Vermelho operational
update
~ BRR and Proactive Investor
video interviews with CEO
Strategic Report
Corporate Governance
Financial Statements
AUDIT AND RISK COMMITTEE
REPORT
The Audit and Risk Committee currently comprises Owen Bavinton (Chairman), David Hall, Allan Walker and William Fisher. The Audit
and Risk Committee met five times during the year.
The Auditors have unrestricted access to the Chairman of the Audit and Risk Committee.
Audit and Risk Committee meetings are usually attended by the Auditor and, by invitation, senior management.
The main responsibilities of the Audit and Risk Committee include:
~ Monitoring the integrity of the Group’s financial statements, including review of the financial statements of the Company including
its annual and half-yearly reports and any formal announcements relating to its financial performance;
~ Reviewing the effectiveness of the Group’s financial reporting, internal control policies and procedures for the identification,
assessment and reporting of risk;
~ Monitoring the effectiveness of the internal control environment;
~ Making recommendations to the Board on the appointment of the Auditors;
~ Making a recommendation to the Board on Auditors’ fees;
~ Agreeing the scope of the Auditors’ annual audit programme and reviewing the output;
~ Ensuring the independence of the Auditors is maintained;
~ Assessing the effectiveness of the audit process; and
~ Developing and implementing policy on the engagement of the Auditors to supply non-audit services.
The Audit and Risk Committee has considered the Group’s internal control and risk management policies and systems, their
effectiveness and the requirements for an internal audit function in the context of the Group’s overall risk management system.
The Committee is satisfied that the Group does not currently require an internal audit function; however, it will continue to
periodically review the situation. An essential part of the integrity of the financial statements lies around the key assumptions and
estimates or judgments to be made. The Committee reviewed and was satisfied that the judgements exercised by management
contained within the Report and Financial Statements are reasonable.
Details of fees payable to the Auditors are set out in Note 7.
Owen Bavinton
Chairman of the Audit & Risk Committee
25 March 2022
42
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
43
REMUNERATION COMMITTEE
REPORT
The remuneration committee comprises David Hall, William Fisher and Allan Walker.
The main purpose of the Remuneration committee is to:
~ Review the performance of the Executive Director and senior management
~ Setting the framework and broad policy for the scale and structure of their remuneration, taking into account all factors which it
shall deem necessary
~ Recommend the allocation of share options for the Board to approve: and
~ Set any performance criteria in relation to the exercise of options granted under any share options schemes adopted by the Group
~ Demonstrate to shareholders that the remuneration of the Executive Director and senior management of the Group is set by
a committee whose members have no personal interest in the outcome of their decision and who will have due regard to the
interests of the shareholders.
Procedures For Developing Policy And Fixing Remuneration
The Remuneration Committee fixes executive remuneration and ensures that no Director is involved in deciding his or her own
remuneration. The Committee is authorised to obtain outside professional advice and expertise. The Remuneration Committee is
authorised by the Board to investigate any matter within its terms of reference and it is authorised to seek any information that it
requires from any employee.
Details Of The Remuneration Policy
The fees to be paid to the Directors and senior management are set by the Remuneration Committee.
Directors’ Service Agreements
Service agreements for Directors and senior management are terminable by either party on notice periods varying between
3 and 12 months.
Directors’ remuneration
The following remuneration comprises Directors’ fees and benefits in kind that were paid to Directors during the year:
Short term benefits
Post
employment
benefits
Base Salary/
Fees
£
LTIP awards/
Annual bonus¹
£
Pension
costs
£
—
—
38,000
33,500
40,000
36,000
100,000
100,000
100,000
100,000
—
—
—
—
31,295
Cost to
Company
Non-Cash
Social
Security
costs
£
Share Based
Payment
Charge
£
Grand Total
£
—
17,824
—
18,100
17,548
—
—
— 155,824
— 133,500
— 158,100
— 184,843
Total
£
—
138,000
133,500
140,000
167,295
291,461
843,390
— 1,134,851
155,565
— 1,290,416
204,750
822,300
— 1,027,050
643,711
2,065,690
31,295
2,740,696
140,032
349,069
— 1,167,082
— 3,089,765
Group 2021
Non-Executive Directors
Sepanta Dorri
David Hall
William Fisher
Allan Walker
Owen Bavinton
Executive Directors
Jeremy Martin
Key Management
Simon Retter
1 Denotes amounts payable for performance related bonuses , including bonuses payable under the LTIP, refer further below in this
report for the details.
44
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
Strategic Report
Corporate Governance
Financial Statements
Short term benefits
Base Salary/
Fees
£
LTIP awards/
Annual bonus¹
£
Post
employment
benefits
Pension
costs
£
—
38,000
16,850
47,500
42,092
—
36,250
37,000
32,513
32,513
—
—
—
—
25,605
Total
£
—
74,250
53,850
80,013
100,210
Cost to
Company
Social
Security costs
£
Non-Cash
Share Based
Payment Charge
£
Grand Total
£
—
4,031
—
9,829
9,083
—
—
78,281
—
53,850
—
—
89,842
— 109,293
252,000
181,283
—
433,283
58,580
— 491,863
195,000
591,442
139,338
458,897
3,000
28,605
337,338
1,078,944
39,921
121,444
— 377,259
— 1,200,388
Group 2020
Non-Executive Directors
Sepanta Dorri
David Hall
William Fisher
Allan Walker
Owen Bavinton
Executive Directors
Jeremy Martin
Key Management
Simon Retter
1 Denotes amounts payable for performance related bonuses , including bonuses payable under the LTIP, refer further below in this
report for the details.
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.
Directors’ Interests In Shares
Director
David Hall
Jeremy Martin
Owen Bavinton
Allan Walker
William Fisher
Sepanta Dorri
Shares
31 December
2021
Shares
31 December
2020
1,039,955
1,039,955
2,028,908
2,028,908
2,000,000
2,000,000
705,479
705,479
1,975,000
1,975,000
—
—
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 2021 and 25 March 2022.
Share Options
The Group operates two Share Option Schemes pursuant to
which Directors and senior executives may be granted options
to acquire Ordinary shares in the Company at a fixed option
exercise price.
Director
David Hall
Jeremy Martin
Owen Bavinton
Allan Walker
William Fisher
Sepanta Dorri
Options
31 December
2021
Options
31 December
2020
13,000,000
14,000,000
22,750,000
25,250,000
11,500,000
13,000,000
11,500,000
12,500,000
11,500,000
13,000,000
—
—
Long Term Incentive Plan (“LTIP”)
In 2019 the Company put in place a Long-Term Incentive Plan
('LTIP') for the purpose of incentivising, motivating and rewarding
certain employees in respect of their contributions to the
Company's mid and long-term commercial objectives designed
to create value for shareholders. The performance conditions
are based upon major project milestones delivered across the
Company’s two projects; Araguaia and Vermelho.
members
The agreements for
include four performance
conditions. The amount of any bonus payment shall be determined
by the performance conditions set out in the applicable bonus
agreement for each individual participant.
The performance conditions are:
1.
Completion of a comprehensive bankable feasibility study
for each Project ('Feasibility Study');
2. Securing full project finance to construct either Project
('Securing Project Finance');
3. The first commercial production of each Project ('First
Commercial Production'); and
4. The sale of any interest in either Project or a specified
percentage of the share capital of the Company ('Sale').
Both the CEO and the CFO are eligible for certain bonuses upon
reaching certain operational milestones which are deemed
to be aligned with shareholder value enhancing points in the
development pathway of both the Araguaia and Vermelho
projects. They are eligible for a fee of 0.475% of gross funds
raised with certain Non-Executive Directors receiving Bonuses
of £200,000 upon securing Project Financing.
During the year the company secured a project finance package
to fully fund the Araguaia project through construction therefore
triggering one of the key performance conditions of the LTIP. The
bonuses paid during the year to the CEO & CFO represent those
due upon the settlement of the equity portion of the project
finance as this closed during the financial year. All awards due
for the debt portion of the project finance package including 50%
of any awards due to certain Non-Executive Directors have been
deferred until first draw down of the senior debt facility in order
to align with value creation for shareholders.
Further details of the Share Option Schemes can be found in
note 16.
By Order of the Board
David Hall
Chairman of the Remuneration Committee
25 March 2022
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
45
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 2021.
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 and Vermelho nickel projects,
located in Pará State in north-eastern Brazil.
Financial results and dividends
The Group results for the year are set out on page 56. The Group is
currently involved in exploration and evaluation activities and not
actively mining. As a result, the Group is not revenue generative.
During the year the group concluded a comprehensive funding
package of US$633 million. The net proceeds of the fundraising
will be used towards the construction of the Araguaia project
as well as for general working capital purposes. In addition the
company has also concluded a US$25million royalty on the
Vermelho Project, the net proceeds from the sale of this royalty
will be used to advance a feasibility study and permitting work
streams on the Vermelho project.
The Directors do not recommend payment of a dividend
(2020: £Nil).
Sustainability
Details of the Company’s approach and activities in relation
to sustainability can be found on pages 22-23 of the Strategic
Report included within this Annual Report and in a standalone
Sustainability Report available on the Company’s website
www.horizonteminerals.com.
The Company currently does not consume a material amount
of energy in the UK and therefore does not publish information
required under SECR. This will be reviewed and it is the intention
of the Company to comply with the reporting disclosures next
year in line with best practice.
Share Capital
Changes in the share capital of the Company are set out in note
14 of the Financial Statements.
Strategic Report
Corporate Governance
Financial Statements
Future developments
In 2022 the Group will be working towards constructing and
bring the Araguaia project into commercial production. Having
published a Pre-Feasibility Study on the Vermelho project during
2019, the Group is focused on further advancing the VNCP project
towards a Feasibility Study and eventual construction decision.
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 2021 will be
distributed to shareholders together with the Annual Report. Full
details of the business to be considered at that meeting can be
found in the Notice.
Independent auditor
The auditor, 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 and CFO
25 March 2022
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 Business Review
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
The group undertakes certain policies and procedures to
mitigate these risk as much as is practicable, including hedging
foreign exchange movements, only using credit worthy financial
institutions and using short term deposits to manage interest
rate and liquidity risks. As the Group moves towards being a
producing entity it will continually review these risk mitigation
policies to cover off any potential exposure to commodity prices
and increase exposure to foreign exchange risks.
In common with all other businesses, the Group is exposed to
financial risks that arise from its operations, these along with
managements’ policies surrounding financial risk management
are explained in note 3 to the financial statements.
Events after the reporting date
The events after the reporting date are set out in note 35 to the
Financial Statements.
46
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HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
47
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
The directors are responsible for preparing the annual report
and the financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law the directors are required
to prepare the group and company financial statements in
accordance with UK adopted international accounting standards.
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.
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
UK adopted international accounting standards 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 group and 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.
Strategic Report
Corporate Governance
Financial Statements
INDEPENDENT AUDITOR’S
REPORT TO THE MEMBERS OF
HORIZONTE MINERALS PLC
OPINION ON THE FINANCIAL STATEMENTS
In our opinion:
~ the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31
December 2021 and of the Group’s loss for the year then ended;
~ the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
~ the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting
standards and as applied in accordance with the provisions of the Companies Act 2006; and
~ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Horizonte Minerals PLC (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the
year ended 31 December 2021 which comprise of the Consolidated Statement of Comprehensive Income, the Consolidated Statement
of Financial Position, the Company Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Company
Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Company Statement of Cash Flows and the notes
to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and UK adopted international accounting standards and, as regards the Parent Company
financial statements, as applied in accordance with the provisions of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section
of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
MATERIAL UNCERTAINTY RELATED TO GOING CONCERN
We draw attention to note 2.2 to the financial statements concerning the Group’s and the Parent Company’s ability to continue as
a going concern. As stated in note 2.2 the Group has forecasted that it will need to draw down on its agreed Senior Debt Facility in
H2.2022. Draw down of the senior debt facility requires conditions precedent to be complied with, some of which are beyond the
Directors’ control. As stated in note 2.2 these events or conditions, along with the other matters set out in note 2.2 indicate that a
material uncertainty exists that may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Because of the judgements made by the Directors, and the significance of this area, we have determined going concern to be a key
audit matter. As described in note 2.2, the Directors have prepared cash flow forecasts which demonstrate that the Senior Debt
Facility will be drawn down in H2 2022, and the ability of the Group to make this draw down requires conditions precedent to be
complied with, some of which are beyond the Directors’ control.
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HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
49
Strategic Report
Corporate Governance
Financial Statements
Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going concern
basis of accounting and in response to the key audit matter included:
~ We obtained the Directors' Group cash flow forecast to 31 December 2023. We assessed the reasonableness of underlying
assumptions, including forecast levels of expenditure used in preparing these forecasts. To assess the reasonableness and timings
of the cash inflows and outflows, we used our knowledge of the business and compared the Directors’ forecasts to budgets used
as part of the fund raise package of $633m entered into in December 2021.
~ We verified cash balances used in the forecast close to the date of sign off of these financial statements, which included
$197million of proceeds from the equity funds raised in 2021.
~ We reviewed the conditions that are required to be complied with to draw down the Senior Debt Facility, discussed these with the
Directors and considered if compliance with these conditions was in the Directors’ control.
~ We considered the impact on the Group and Parent Company’s cash flow forecast should the Senior Debt Facility not be available.
~ We assessed the appropriateness of the going concern disclosures included in the financial statements against the requirements
of the relevant accounting standards.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk
of material misstatement.
Our Group audit scope focused on the Group’s significant components, being Araguaia Niquel Mineracao Ltda and Horizonte Nickel
(IOM) Ltd, which were subject to a full scope audit together with the Parent Company. In addition, Trias Brasil Mineracao Ltda, Champol
(IOM) Ltd and Nickel Production Services BV, which were treated as insignificant components, were subject to specific audit procedures
on the significant risk areas and analytical procedures. The Group audit team performed the audit of the Parent Company and the other
significant components, other than those components located in Brazil which were audited by a BDO network member firm in Brazil.
The remaining components of the Group were considered insignificant and these components were principally subject to analytical
review procedures which were performed by the Group audit team.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.
Our involvement with component auditors
OVERVIEW
Coverage
Key audit matters
90% (2020: 80%) of Group net loss
90% (2020: 94%) of Group total assets
Carrying value of exploration
and evaluation assets and mine
development property
Valuation of royalty funding
arrangement
Going concern
2021
2020
Materiality
Group financial statements as a whole
£3,403,000 (2020:£750,000) based on 1.5% of total assets
(2020: 1.5% of total assets)
For the work performed by component auditors, we determined the level of involvement needed in order to be able to conclude
whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements as a
whole. Our involvement with component auditors included the following:
~ Detailed Group reporting instructions were sent to the component auditors, which included the significant areas to be covered by
the audits (including areas that were considered to be key audit matters), and set out the information to be reported to the Group
audit team.
~ The Group audit team was actively involved in the direction of the audits performed by the component auditor for Group reporting
purposes, along with the consideration of findings and determination of conclusions drawn.
~ The Group audit team reviewed the component auditor’s work papers in Brazil and engaged with the component auditors during
their fieldwork and completion phases.
~ For the two principal operating components in Brazil, the Group audit team also performed audit procedures in respect of the
significant risk areas.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to
the matter described in the material uncertainty related to going concern of our report, we have determined the matters below to be
the key audit matters to be communicated in our report.
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2021 REPORT AND ACCOUNTS
51
Key audit matter
How the scope of our audit addressed the key audit matter
OUR APPLICATION OF MATERIALITY
Strategic Report
Corporate Governance
Financial Statements
Carrying value
of exploration
and evaluation
assets
and mine
development
property
See notes 4.1,
10 and 11 to
the financial
statements.
The Group holds the Araguaia mine
development property carried
at a value of £44,088,134 and
the Vermelho exploration and
evaluation asset carried at a value
of £5,949,649.
Each year management are
required to assess whether
there are any indicators that the
mine development property and
exploration and evaluation asset
could be impaired.
Valuation
of royalty
funding
arrangement
See notes 20
and 4.4
Management have carried out a
review for indicators of impairment
and have not identified any indicators.
Reviewing indicators of impairment
and assessment of carrying values
require significant estimates and
judgements and therefore we
identified this as a key audit matter.
In 2019 Horizonte entered into a
US$25m royalty funding agreement
with Orion Mine Finance in exchange
for future royalty payments linked
to the future revenues of the
Araguaia project.
The royalty agreement includes a
buyback option enabling Horizonte
to reduce the royalty rate and other
cash payment options (the call,
make whole and put options) for
part reduction in the royalty rate,
which require the occurrence of
certain events.
The agreement is a hybrid contract
that contains a non-derivative host
loan and prepayment options in the
form of embedded derivatives which
should be separated for accounting
purposes. The embedded derivatives
are initially recognised at fair value
and subsequently revalued at each
period end.
Management has engaged an
independent expert to calculate the
fair value of the buyback option. The
fair value calculation utilised Monte
Carlo simulation methodology.
The valuation of these financial
instruments required management
to make a number of key estimates.
Accordingly, the valuation of the
royalty funding agreement is
considered to be a key audit matter.
We have reviewed management’s impairment assessments for both projects
and our procedures included the following :
~ We considered whether management’s assessments of impairment had
been carried out in accordance with the requirements of the accounting
standards.
~ We reviewed the feasibility studies prepared by independent consultants
for consistency with management’s representations and assessed the
competence and independence of the experts used by management.
• For the Araguaia project, this assessment is supported by the
externally prepared feasibility study published in November 2018 and
revised in April 2021.
• For the Vermelho project, this assessment is supported by the
externally prepared pre-feasibility study published in October 2019.
~ We agreed the validity of licences held by the Group to the Brazilian
Government’s Departamento Nacional de Producao Mineral website.
We also reviewed the correspondence, contracts and other documents
regarding the licenses to confirm that the Group has the relevant rights
for its activities in the stated areas for Araguaia and Vermelho.
Key observations:
Based on our work we concur with management’s impairment indicator
assessment, and as a result consider the carrying value of the Group’s
exploration and evaluation asset and mine development property
is not impaired.
Our procedures in relation to the valuation of the royalty funding loan and
embedded derivatives are set our below.
In respect of the host loan:
~ We tested the valuation model prepared by management, checking that
the model’s methodology was in agreement with the royalty agreement
and in accordance with accounting standards and that the assumptions
were in agreement with management’s justifications and explanations.
We also checked the arithmetical accuracy of the amortised loan model.
~ We critically assessed management’s key assumptions, including long
term nickel price, nickel price inflation and the adopted royalty rate,
which is determined by the date of commencement of construction. We
made our assessment by reference to independent sources of data and
supporting documentation held by the Group.
In respect of the fair value of the buyback option:
~ We reviewed the option valuation methodology adopted to check that
the features of the option had been appropriately modelled and we
also confirmed with management that the modelling is in line with
their understanding of the option features. This was reviewed by BDO
valuation experts to ensure it was appropriately modelled.
~ We checked that the key assumptions used were reasonable and in
agreement with those used for the valuation of the host loan.
~ The nickel price volatility is an additional key assumption for the option
valuation. We recalculated the nickel price volatility using independently
sourced data and it was in close proximity to that used by management.
~ We assessed the competence and independence of the valuation expert
used by management.
Key observations:
Based on our work, we concur with managements valuation methodology and
the key estimates used in valuing the host loan and buy back option.
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We
consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of
reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will
not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Group financial statements
Parent company financial statements
2021
£
2020
£
2021
£
2020
£
Materiality
3,403,000
750,000
3,063,000
675,000
Basis for
determining
materiality
Rationale
for the
benchmark
applied
Performance
materiality
Basis for
determining
performance
materiality
1.5% of total assets
1.5% of total assets
Restricted to 90% of
Group materiality
Restricted to 90% of
Group materiality
We consider total assets to be the most significant determinant
of the Group’s financial performance for users of the financial
statements, given the Group’s mine development focus. There
was a significant increase in total assets following the 2021
equity fund raise.
Calculated as a percentage of Group materiality
for Group reporting purposes as the statutory
materiality exceeded Group materiality.
2,552,000
562,500
2,297,000
506,250
75% of materiality based on consideration of factors including the level of historical errors and nature of activities.
Component materiality
We set materiality for each component of the Group based on a percentage of between 4% and 14% (2020: 5% to 44%) of Group
materiality dependent on the size and our assessment of the risk of material misstatement of that component. Component
materiality ranged from £145,000 to £460,000 (2020: £35,000 to £330,000). In the audit of each component, we further applied
performance materiality levels of 75% of the component materiality to our testing to ensure that the risk of errors exceeding
component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £68,000
(2020:£13,500). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in the 2021
Report and Accounts other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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2021 REPORT AND ACCOUNTS
53
OTHER COMPANIES ACT 2006 REPORTING
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Strategic Report
Corporate Governance
Financial Statements
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic
report and
Directors’
report
In our opinion, based on the work undertaken in the course of the audit:
~ the information given in the Strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
~ the Strategic report and the Directors’ report have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the Group and 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.
Matters on
which we
are required
to report by
exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires
us to report to you if, in our opinion:
~ adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
~ the Parent Company financial statements are not in agreement with the accounting records and returns; or
~ certain disclosures of Directors’ remuneration specified by law are not made; or
~ we have not received all the information and explanations we require for our audit.
RESPONSIBILITIES OF DIRECTORS
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, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative
but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below:
~ We obtained an understanding of the Group’s activities and considered the laws and regulations of the UK and Brazil to be of
significance in the context of the Group audit. In doing so, we made inquiries of management and the Audit Committee, considered
the Group’s control environment as it pertains to compliance with laws and regulations and considered the activities of the Group.
We determined the most significant laws and regulations to be Companies Act 2006, elements of the reporting framework, tax
legislation and the Brazilian environmental regulations.
~ We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
and component auditors, and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
~ We made inquiries of management and the Board and reviewed Board and Committee minutes to identify any instances of
irregularities or non-compliance.
~ We agreed the financial statement disclosures to underlying supporting documentation and performed detailed testing on
accounts balances which were considered to be at a greater risk of susceptibility to fraud.
~ In addressing risk of management override of control, we performed testing of general ledger journal entries to the financial
statements, including verification of journals which we consider exhibit higher fraud risk characteristics based on our
understanding of the Group. This included testing journals direct to cash and expenses, which are outside of the normal purchase
to pay cycle.
~ As part of our testing of management override of controls we performed procedures on accounts subject to greater management
estimate including the valuation of the royalty funding arrangement and carrying value of exploration and evaluation assets and
mine development property, refer to key audit matters above.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk
of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the
audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Peter Acloque (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
United Kingdom
25 March 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
54
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
55
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
For the year ended 31 December 2021
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
Company number: 05676866
Strategic Report
Corporate Governance
Financial Statements
Administrative expenses
Change in fair value of derivative
Change in fair value of special warrant liability
(Loss)/Gain on foreign exchange
Operating loss
Net finance (cost)/income
Loss before taxation
Income tax
Year ended
31 December
2021
£
Year ended
31 December
2020
£
Notes
6
20
22
8
9
(5,678,350)
(2,949,736)
1,853,282
(424,500)
(1,174,796)
—
(627,145)
751,313
(5,627,009)
(2,622,923)
(4,043,794)
236,986
(9,670,803)
(2,385,937)
—
108,526
Loss for the year from continuing operations attributable to owners of the parent
(9,670,803)
(2,277,411)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Currency translation differences on translating foreign operations
17
(2,418,094)
(8,151,944)
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
(2,418,094)
(8,151,944)
(12,088,897)
(10,429,355)
Basic and diluted loss per share (p)
25
(0.568)
(0.157)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
As at 31 December 2021
Assets
Non-current assets
Intangible assets
Property, plant & equipment
Right of use assets
Current assets
Trade and other receivables
Derivative financial asset
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
Royalty Finance
Lease liabilities
Deferred consideration
Trade payables
Current liabilities
Trade and other payables
Deferred consideration
Lease liabilities
Total liabilities
Total equity and liabilities
Notes
31 December
2021
£
31 December
2020
£
10
11
21
12
20
13
14
15
17
19
20
21
19
18
18
19
21
6,165,677
52,381,161
282,320
58,829,158
10,237,167
3,672,924
156,186,302
170,096,393
228,925,551
6,220,872
30,839,948
—
37,060,820
270,539
1,756,553
10,935,563
12,962,655
50,023,475
38,023,656
177,928,649
(15,236,968)
(30,608,510)
170,106,827
14,493,773
41,848,306
(12,818,874)
(22,112,503)
21,410,702
4,996,761
5,927,025
33,016,624
22,053,341
238,716
3,358,630
451,863
—
—
—
42,062,594
27,980,366
16,008,280
704,246
43,604
16,756,130
58,818,724
228,925,551
632,407
—
—
632,407
28,612,773
50,023,475
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 25 March 2022 and were signed on its behalf.
David J Hall
Chairman
Jeremy J Martin
Chief Executive Officer
56
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
57
COMPANY STATEMENT
OF FINANCIAL POSITION
Company number: 05676866
As at 31 December 2021
Non-Current Assets
Investment in subsidiaries
Loans to 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
Other reserves
Retained losses
Total equity
Liabilities
Non-current liabilities
Contingent consideration
Current liabilities
Trade and other payables
Loans from subsidiary
Total liabilities
Total equity and liabilities
Notes
29
30
12
13
14
15
17
19
18
30
31 December
2021
£
2,348,142
69,811,930
72,160,072
9,763,600
147,359,029
157,122,629
229,282,701
38,023,656
177,928,649
10,888,760
(17,465,060)
209,376,005
4,996,761
4,996,761
12,081,730
2,828,205
14,909,935
19,906,696
229,282,701
31 December
2020
£
2,348,142
64,692,156
67,040,298
96,196
5,308,954
5,405,150
72,445,448
14,493,773
41,848,306
10,888,760
(13,186,690)
54,044,149
5,927,025
5,927,025
280,179
12,194,095
12,474,274
18,401,299
72,445,448
The above Company Statement of Financial Position should be read in conjunction with the accompanying notes. The loss for the
period was £5,453,166 (2020: £3,377,407 profit).
The Financial Statements were authorised for issue by the Board of Directors on 25 March 2022 and were signed on its behalf.
David J Hall
Chairman
Jeremy J Martin
Chief Executive Officer
Strategic Report
Corporate Governance
Financial Statements
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended 31 December 2021
As at 1 January 2020
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 2020
Loss for the year
Other comprehensive income:
Currency translation differences on translating
foreign operations
Total comprehensive income for the year
Attributable to owners of the parent
Share
capital
£
Share
premium
£
Retained
losses
£
Other
reserves
£
Total
£
14,463,773
41,785,306
(19,835,092)
(4,666,930)
31,747,057
—
—
—
— (2,277,411)
—
(2,277,411)
—
— (8,151,944)
(8,151,944)
— (2,277,411)
(8,151,944)
(10,429,355)
30,000
63,000
—
—
—
—
30,000
63,000
—
—
—
—
—
—
—
—
93,000
—
—
93,000
14,493,773
41,848,306
(22,112,503)
(12,818,874)
21,410,702
—
—
—
— (9,670,803)
—
(9,670,803)
—
— (2,418,094)
(2,418,094)
— (9,670,803)
(2,418,094)
(12,088,897)
Issue of ordinary shares
Issue costs
22,649,282
136,784,844
— (5,904,761)
—
—
Conversion of special warrants into shares
880,601
5,795,235
1,174,796
Special warrants issue costs
—
(594,975)
—
— 159,434,126
—
—
—
(5,904,761)
7,850,632
(594,975)
Total transactions with owners, recognised
directly in equity
23,529,883
136,080,343
1,174,796
— 160,785,022
As at 31 December 2021
38,023,656
177,928,649
(30,608,510)
(15,236,968)
170,106,827
A breakdown of other reserves is provided in note 17.
58
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
59
COMPANY STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED STATEMENT
OF CASH FLOWS
For the year ended 31 December 2021
Strategic Report
Corporate Governance
Financial Statements
Attributable to equity shareholders
Share
capital
£
Share
premium
£
Retained
losses
£
Merger
reserves
£
Total
£
As at 1 January 2020
14,463,773
41,785,306
(16,564,099)
10,888,760
50,573,740
Profit and total comprehensive income for the year
Issue of ordinary shares
Issue costs
Share-based payments
—
30,000
—
—
—
3,377,409
63,000
—
—
—
—
—
Total transactions with owners, recognised directly
in equity
30,000
63,000
3,377,409
—
—
—
—
—
3,377,409
93,000
—
—
3,470,409
As at 31 December 2020
14,493,773
41,848,306
(13,186,690)
10,888,760
54,044,149
Profit and total comprehensive income for the year
—
— (5,453,166)
Issue of ordinary shares
Issue costs
22,649,282
136,784,844
— (5,904,761)
—
—
Conversion of special warrants into shares
880,601
5,795,235
1,174,796
Special warrants issue costs
—
(594,975)
—
— (5,453,166)
— 159,434,126
— (5,904,761)
—
—
7,850,632
(594,975)
Cash flows from operating activities
Loss before taxation
Finance income
Finance costs
Exchange differences
Change in fair value of derivative asset
Fair value of special warrant liability
Operating loss before changes in working capital
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Cash used in operating activities
Income taxes paid
Net cash used in operating activities
Cash flows from investing activities
Purchase of exploration and evaluation assets
Purchase of property, plant and equipment
Total transactions with owners, recognised directly
in equity
23,529,883
136,080,343
1,174,796
— 160,785,022
Interest received
As at 31 December 2021
38,023,656
177,928,649
(17,465,060)
10,888,760
209,376,005
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Issue costs
Proceeds from issue of share warrants
Share warrants 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
31 December
2021
£
31 December
2020
£
Notes
(9,670,803)
(2,385,936)
—
(236,986)
4,043,794
—
627,145
(751,313)
(1,853,282)
424,500
1,174,796
—
(5,678,350)
(2,949,735)
(9,966,626)
(135,814)
11,929,592
(51,526)
(3,715,384)
(3,137,075)
—
(51,071)
(3,715,384)
(3,188,146)
(300,676)
—
(10,589,678)
(4,153,198)
363,923
151,459
(10,526,431)
(4,001,739)
159,434,126
(5,904,761)
7,850,632
(594,975)
93,000
—
—
—
160,785,022
93,000
146,543,207
(7,096,885)
10,935,563
17,760,330
(1,292,468)
272,118
13
156,186,302
10,935,563
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
60
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
61
COMPANY STATEMENT
OF CASH FLOWS
For year ended 31 December 2021
Cash flows from operating activities
Profit before taxation
IFRS9 Expected credit loss (credit)/charge
Finance income
Finance costs
Exchange differences
Change in fair value of contingent consideration
Fair value of special warrant liability
Operating profit before changes in working capital
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash flows generated / (used) from operating activities
Taxes paid
Net cash flows generated / (used) 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
Proceeds from issue of share warrants
Share warrants 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
31 December
2021
£
31 December
2020
£
Notes
(5,453,166)
3,428,478
27,976
(3,814,254)
(935,038)
—
(72,155)
445,065
453,520
(1,491,383)
—
(764,109)
1,174,796
—
(4,731,912)
(2,268,358)
(9,667,401)
11,801,551
39,180
(41,409)
(2,597,762)
(2,270,587)
—
(51,071)
(2,597,762)
(2,321,658)
(14,485,665)
(10,363,054)
4,773
72,155
(14,480,892)
(10,290,899)
159,434,126
(5,904,761)
7,850,632
(594,975)
93,000
—
—
—
160,785,022
93,000
143,706,368
(12,519,557)
5,308,954
17,393,773
(1,656,293)
434,738
13
147,359,029
5,308,954
The above Company Statement of Cash Flows should be read in conjunction with the accompanying notes.
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE FINANCIAL
STATEMENTS
1 GENERAL INFORMATION
The principal activity of Horizonte Minerals Plc (‘the Company’) and its subsidiaries (together ‘the Group’) is the exploration and
development of base metals. The Company’s shares are listed on the AIM market of the London Stock Exchange and on the
Toronto Stock Exchange. The Company is incorporated and domiciled in England and Wales. The address of its registered office is
Rex House, 4-12 Regent Street, London, SW1Y 4RG.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these Financial Statements are set out below. These policies have
been consistently applied to all the years presented.
2.1 BASIS OF PREPARATION
These consolidated financial statements have been prepared in accordance with UK adopted international accounting standards
and International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”). Financial
Statements have been prepared under the historical cost convention except for the following items (refer to individual accounting
policies for details):
~ Contingent and deferred consideration
~ Financial instruments – fair value through profit and loss
~ Cash settled share based payment liabilities
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted
international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK-adopted international accounting standards in its consolidated financial statements on 1 January 2021. There
was no impact or changes in accounting policies from the transition and the Group will also continue to comply with IFRS and their
interpretations issued by the IASB.
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. 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.
2.2 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 and development projects.
The Group concluded a comprehensive funding package of US$633 million in December 2021. The net proceeds of the fundraising
will be used towards the construction of the Araguaia project as well as for general working capital purposes. In addition the
company has also concluded a US$25 million royalty agreement on the Vermelho Project, the net proceeds from the sale of this
royalty will be used to advance a feasibility study and permitting work streams on the Vermelho project. The equity fundraise
(US$197 million of the US$633 million) was finalized and funds received in December 2021. The debt elements of the funding
package include Convertible Loan Notes (US$65 million), a Cost Overrun Facility (US$25 million) and a Senior Debt Facility
(US$346.2 million).
Based on current commitments entered into by the Group, and following the satisfaction of all material conditions precedent, the
funds from the convertible loan notes and the royalty are expected to be drawn down in March 2022. The first drawdown under
the Senior Debt Facility is expected to occur in the fourth quarter of 2022 following satisfaction of certain conditions precedent
customary to a financing of this nature. As the senior debt is conditional, there is no guarantee that the conditions of this element of
the debt package will be satisfied.
62
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
63
The funds held at the year-end along with those to be raised post year end means the Group has cash reserves which are
considered sufficient by the Directors to execute the construction of the Araguaia Project and fund its general working capital
requirements for the foreseeable future. The drawdown of the Senior Debt Facility is conditional upon the expenditure of a certain
level of equity amongst other conditions precedent, by which time the company is expected to have made significant financial
commitments. There exists a risk that the Senior Debt Facility is not able to be drawn due to unforeseen circumstances or
noncompliance with any conditions precedent which may or may not be within the control of the Group. Should the Senior Debt not
be drawn then the Group would require alternative sources of funding to meet its commitments.
If additional projects are identified and the Vermelho project advances, additional funding may be required.
These factors indicate the existence of a material uncertainty which may cast significant doubt over the Group and the Company’s
ability to continue as a going concern and therefore they may be unable to realise its assets and discharge their liabilities in the
normal course of business. The financial statements do not include any adjustments that would result if the Group or the Company
were unable to continue as a going concern.
2.2 (B) ASSESSMENT OF THE IMPACT OF COVID-19
During the period of these financial statements there has been an ongoing significant global pandemic which has had significant
knock on effects for the majority of the world’s population, by way of the measures governments are taking to tackle the issue.
This represents a risk to the Group’s operations by restricting travel, the potential to detriment the health and wellbeing of its
employees, as well as the effects that this might have on the ability of the Group to finance and advance its operations in the
timeframes envisaged. The Group has taken steps to try and ensure the safety of its employees and operate under the current
circumstances and feels the outlook for its operations remains positive, however risk remain should the pandemic worsen or
changes its impact on the Group. The assessment of the possible impact on the going concern position of the Group is set out in
the going concern note below. In addition, because of the long term nature of the Group’s nickel projects and their strong project
economics management do not consider that COVID has given rise to any impairment indicators. The Group has not received any
government assistance.
The uncertainty as to the future impact of the Covid-19 pandemic has been considered as part of the Group’s adoption of the going
concern basis. In response to the easing of Covid-19 restrictions, employees are working from the Group’s offices in London and
Brazil and will continue to adhere to government guidelines. International travel has resumed and site work for the two projects has
been resumed.
To date, the Group has not been materially adversely affected by the COVID-19 pandemic. However, the ongoing nature and
uncertainty of the pandemic in many countries including the measures and restrictions put in place (travel bans and quarantining in
particular) continue to have the ability to impact the Group’s business continuity, workforce, supply-chain, business development
and, consequently, future revenues.
In addition, any infections occurring on the Group’s premises could result in the Group’s operations being suspended, which may
have an adverse impact on the Group’s operations as well as adverse implications on the Group’s future cash flows, profitability and
financial condition. Supply chain disruptions resulting from the COVID-19 pandemic and measures implemented by governmental
authorities around the world to limit the transmission of the virus (such as travel bans and quarantining) may, in addition to the
general level of economic uncertainty caused by the COVID-19 pandemic, also adversely impact the Group’s operations, financial
position and prospects.
As a result of considerations noted above, the Directors consider the impact of COVID-19 could delay the drawdown of the senior
debt facility.
2.3 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
a) New and amended standards adopted by the Group
New standards impacting the Group that are adopted in the annual financial statements for the year ended 31 December 2021, are:
Standard
Detail
IFRS 7, IFRS 9, IFRS16, IAS 39
Amendments regarding interest rate benchmark reform –
phase 2
Effective date
1 January 2021
The adopted amendments have not resulted in any changes to the Group Consolidated Financial Statements.
b) New and amended standards, and interpretations issued but not yet effective for the financial year beginning 1
January 2021 and not early adopted
At the date of authorisation of these Consolidated Financial Statements, the following new standards, amendments and
interpretations to existing standards have been published but are not yet effective and have not been adopted early by the Group.
Strategic Report
Corporate Governance
Financial Statements
Standard
IAS 16
IAS 37
IFRS 3
Detail
Amendments prohibiting a company from deducting from the cost of
property, plant and equipment amounts received from selling items
produced while the company is preparing the asset for its intended use
Amendments regarding the costs to include when assessing whether a
contract is onerous
Amendment - replacing a reference to an old version of the Board’s
Conceptual Framework for Financial Reporting with a reference to the
latest version, which was issued in March 2018.
Annual Improvements to IFRSs
(2018-2020 Cycle) - IFRS 9
IFRS 9 - Clarifies the fees a company includes in assessing the terms of a
new or modified financial liability to determine whether to derecognise a
financial liability.
IAS 1
IAS 8
Amendment – regarding the classification of liabilities
Amendment – definition of accounting estimates
IAS 1 and IFRS Pratice Statement 2 Amendment – disclosure of accounting policies
IAS 12
Amendment - Deferred Tax related to Assets and Liabilities arising from a
Single Transaction
Effective date
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
1 January 2023
1 January 2023
Management anticipates that all the pronouncements will be adopted in the Group’s accounting policies for the first period
beginning after the effective date of the pronouncement.
2.4 BASIS OF CONSOLIDATION AND BUSINESS ACQUISITIONS
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 IFRS9
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.
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The following 100% owned subsidiaries have been included within the consolidated Financial Statements:
2.5 INTANGIBLE ASSETS
Strategic Report
Corporate Governance
Financial Statements
Subsidiary undertaking
Horizonte Exploration Ltd
Held
Directly
Horizonte Minerals (IOM) Ltd
Indirectly
HM Brazil (IOM) Ltd
Indirectly
Cluny (IOM) Ltd
Indirectly
Champol (IOM) ltd
Indirectly
Horizonte Nickel (IOM) Ltd
Indirectly
Nickel Production Services B.V
Directly
Battery Material Services B.V
Directly
HM do Brasil Ltda
Indirectly
Araguaia Niquel Metais Ltda
Indirectly
Trias Brasil Mineração Ltda
Indirectly
Registered Address
incorporation Nature of business
Country of
Rex House, 4-12 Regent Street, London
SW1Y 4RG
1st Floor, Viking House, St Pauls Square,
Ramsey, IM8 1GB, Ilse of Man
1st Floor, Viking House, St Pauls Square,
Ramsey, IM8 1GB, Ilse of Man
1st Floor, Viking House, St Pauls Square,
Ramsey, IM8 1GB, Ilse of Man
First Names House, Victoria Road, Douglas,
IM2 4DF, Isle of Man
1st Floor, Viking House, St Pauls Square,
Ramsey, IM8 1GB, Ilse of Man
England Mineral Exploration
Isle of Man
Holding company
Isle of Man
Holding company
Isle of Man
Holding company
Isle of Man
Holding company
Isle of Man
Holding company
Atrium Building, 8th floor, Strawinskylaan
3127, 1077 ZX, Amsterdam
The Netherlands Provision of financial
services
Naritaweg 165, 1043BW Amsterdam, The
Netherlands
The Netherlands Provision of financial
services
CNPJ 07.819.038/0001-30 com sede na Rua
Paraíba, n. 1465, sala 1102 – parte, bairro
Savassi 2904, Belo Horizonte – MG. CEP:
30.130-148
CNPJ 97.515.035/0001-03 com sede na Rua
Paraíba, n. 1465, sala 1102 – parte, bairro
Savassi 2904, Belo Horizonte – MG. CEP:
30.130-148
CNPJ 23.282.280/0001-73 com sede na Rua
Paraíba, n° 1465, sala 1102 – Parte, bairro
Savassi, Belo Horizonte/MG, CEP 30.130-148,
Brazil
Brazil Mineral Exploration
Brazil Mineral Exploration
Brazil Mineral Exploration
2.4 (b) Subsidiaries and Acquisitions
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. Control is recognised where an investor is expected, or has rights, to variable
returns from its investment with the investee, and has the ability to affect these returns through its power over the investee.
Based on the circumstances of the acquisition an assessment will be made as to whether the acquisition represents an acquisition
of an asset or the acquisition of a business. In the event of a business acquisition, the assets, liabilities and contingent liabilities of a
subsidiary are measured at their fair value at the date of acquisition. Any excess of the cost of the acquisition over the fair values of
the identifiable net assets acquired is recognised as a “fair value” adjustment.
If the cost of the acquisition is less than the fair value of net assets of the subsidiary acquired, the difference is recognised directly
in profit or loss. In the event of an asset acquisition assets and liabilities are assigned a carrying amount based on relative fair value.
The results of subsidiaries acquired or disposed of during the year are included in the statement of comprehensive income from the
effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies into line with
those used by the Group.
Contingent consideration as a result of business acquisitions is included in cost at its acquisition date assessed value and, in the
case of contingent consideration classified as a financial liability, remeasured subsequently through the profit and loss.
(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
and are initially valued and subsequently carried at cost less any subsequent impairment. 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.
Impairment reviews for deferred exploration and evaluation expenditure are carried out on a project by project basis, with each
project representing a potential single cash generating unit. In accordance with the requirements of IFRS 6, an impairment review is
undertaken when indicators of impairment arise such as:
unexpected geological occurrences that render the resource uneconomic;
title to the asset is compromised;
(i)
(ii)
(iii) variations in mineral prices that render the project uneconomic;
(iv) substantive expenditure on further exploration and evaluation of mineral resources is neither budgeted nor planned; and
(v)
the period for which the Group has the right to explore has expired and is not expected to be renewed.
See note 2.7 for impairment review process if impairment indicators are identified.
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. Whenever a commercial discovery is the direct result of the exploration and evaluation assets, upon the decision
to proceed with development of the asset and initial funding arrangements are in place the costs shall be transferred to a Mine
Development asset within property, plant and equipment.
(c) Acquisitions of Mineral Exploration Licences
Acquisitions of Mineral Exploration Licences through acquisition of non-operational corporate structures that do not represent a
business, and therefore do not meet the definition of a business combination, are accounted for as the acquisition of an asset and
recognised at the fair value of the consideration. Related future consideration if contingent is recognised if it is considered that it is
probable that it will be paid.
2.6 PROPERTY, PLANT AND EQUIPMENT
Mine development property
Following determination of the technical feasibility and commercial viability of a mineral resource, the relevant expenditure is
transferred from exploration and evaluation assets to mine development property.
Further development costs are capitalised to mine development properties, if and only if, it is probable that future economic
benefits associated with the item will flow to the entity and the cost can be measured reliably. Cost is defined as the purchase
price and directly attributable costs. Once the asset is considered to be capable of operating in a manner intended by management,
commercial production is declared, and the relevant costs are depreciated. Evaluated mineral property is carried at cost less
accumulated depreciation and accumulated impairment losses.
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Strategic Report
Corporate Governance
Financial Statements
Short lived Property, plant and equipment
All other 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. Major repairs and maintenance are capitalised, all other repairs and maintenance costs are charged to profit or loss during
the financial period in which they are incurred.
Depreciation and amortisation
Mine development property is not depreciated prior to commercial production but is reviewed for impairment annually (see
“Impairment of assets” section below). Upon commencement of commercial production, mine development property is transferred
to a mining property and is depreciated on a units-of-production basis. Only proven and probable reserves are used in the tonnes
mined units of production depreciation calculation.
Depreciation is charged on a straight-line basis for all other property, plant and equipment, so as to write off the cost of assets,
over their estimated useful lives, using the straight-line method, on the following bases:
Impairment reviews performed under IAS 36 are carried out when there is an indication that the carrying value may be impaired.
Such key indicators (though not exhaustive) to the industry include:
a significant deterioration in the spot price of nickel
(i)
(ii) a significant increase in production costs
(iii) a significant revision to, and reduction in, the life of mine plan
If any indication of impairment exists, the recoverable amount of the asset is estimated, being the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash generating unit) is reduced to its recoverable amount. Such impairment losses are recognised
in profit or loss for the year.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior years. A
reversal of an impairment loss is recognised in profit or loss for the year.
Office equipment
Vehicles and other field equipment
25%
25% – 33%
2.8 FOREIGN CURRENCY TRANSLATION
Land is not depreciated. 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.
Capitalisation of borrowing costs
Borrowing costs are expensed except where they relate to the financing of construction or development of qualifying assets.
Borrowing costs directly related to financing of qualifying assets in the course of construction are capitalised to the carrying value
of the Araguaia mine development property. Where funds have been borrowed specifically to the finance the Project, the amount
capitalised represents the actual borrowing costs incurred net of all interest income earned on the temporary re-investment of
these borrowings prior to utilisation. Borrowing costs capitalised include:
~ Interest charge on royalty finance
~ Adjustments to the carrying value of the royalty finance
~ Unwinding of discount and adjustment to carrying value on contingent consideration payable for Araguaia
The capitalisation of adjustments to the carrying values as a result of changes in estimates is an accounting policy choice under IFRS
and management have selected to capitalise. To the extent that the Group borrows funds generally and uses them for the purpose
of obtaining a qualifying asset, the Group shall determine the amount of borrowing costs eligible for capitalisation by applying a
capitalisation rate to the expenditures on that asset. The capitalisation rate shall be the weighted average of the borrowing costs
applicable to all borrowings of the entity that are outstanding during the period.
All other borrowing costs are recognized as part of interest expense in the year which they are incurred.
2.7 IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an indefinite useful life, such as goodwill are not subject to amortisation and are tested annually for impairment.
At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to
determine whether there is any indication that those assets have suffered impairment. Prior to carrying out impairment reviews,
the significant cash generating units are assessed to determine whether they should be reviewed under the requirements of IFRS
6 – Exploration for and Evaluation of Mineral Resources or IAS 36 – Impairment of Assets. Such determination is by reference to
the stage of development of the project and the level of reliability and surety of information used in calculating value in use or fair
value less costs to sell. Impairment reviews performed under IFRS 6 are carried out on a project by project basis, with each project
representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise;
typically when one of the following circumstances applies:
sufficient data exists that render the resource uneconomic and unlikely to be developed
title to the asset is compromised
(i)
(ii)
(iii) budgeted or planned expenditure is not expected in the foreseeable future
(iv)
insufficient discovery of commercially viable resources leading to the discontinuation of activities
(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 functional currency of the project
financing subsidiaries incorporated in the Netherlands is USD, however debt costs capitalised to the mine development asset are
recorded in Brazilian Real. The Consolidated Financial Statements are presented in Pounds Sterling, rounded to the nearest pound,
which is the Company’s functional and Group’s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions or valuation where such items are re-measured. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in profit or loss.
(c) Group companies
The results and financial position of all the Group’s entities (none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
1. assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that
statement of financial position;
2. each component of profit or loss is translated at average exchange rates during the accounting period (unless this average is not
a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
3. all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of monetary items
receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future are taken to
other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in profit or loss as part of
the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign
entity and retranslated at the end of each reporting period.
The major exchange rates used for the revaluation of the statement of financial position at 31 December 2021 were United States
Dollar $1:£0.742 (31 December 2020: $1:£0.73), Brazilian Real (R$):£0.133 (31 December 2020: R$:£0.141).
Foreign currency translation reserve includes movements that relate to the retranslation of the subsidiaries whose functional
currencies are not Pounds Sterling.
During the year ended 31 December 2021, the Brazilian Real depreciated by 6% since 31 December 2020. Currency translation
differences for the year of £2.4 million loss (2020:£8.2 million loss) included in comprehensive income arose on the translation of
property plant and equipment, intangible assets and cash and cash equivalents denominated in Brazilian Real.
The foreign exchange loss for the year of £627,145 included in the statement of comprehensive income relates to the translation
differences of foreign currency cash and cash equivalents balances and intercompany balances denominated in currencies other
than the functional currency of the entity.
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2.9 FINANCIAL INSTRUMENTS
Financial instruments are measured as set out below. Financial instruments carried on the statement of financial position include
cash and cash equivalents, trade and other receivables, trade and other payables and loans to group companies.
Financial instruments are initially recognised at fair value when the group becomes a party to their contractual arrangements.
Transaction costs directly attributable to the instrument’s acquisition or issue are included in the initial measurement of financial
assets and financial liabilities, except financial instruments classified as at fair value through profit or loss (FVTPL). The subsequent
measurement of financial instruments is dealt with below.
Financial assets
On initial recognition, a financial asset is classified as:
~ Amortised cost;
~ Fair value through other comprehensive income (FVTOCI) - equity instruments; or
~ FVTPL.
The group does not currently have any financial assets classified as FVTOCI.
Fair value through profit or loss
This category comprises in-the-money derivatives. They are carried in the statement of financial position at fair value with changes
in fair value recognised in the profit loss statement.
Amortised cost
Financial assets that arise principally from assets where the objective is to hold these assets in order to collect contractual cash
flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains or losses, together with
foreign exchange gains or losses. Impairment losses are presented as separate line item in the statement of profit or loss. A gain
or loss on a debt investment that is subsequently measured at FVTPL is recognised in profit or loss and presented net within other
gains or losses in the period in which it arises. On derecognition of a financial asset, the difference between the proceeds received
or receivable and the carrying amount of the asset is included in profit or loss.
Financial assets at amortised cost consist of trade receivables and other receivables (excluding taxes), cash and cash equivalents,
and related party intercompany loans
Impairment provisions for receivables and loans to related parties are recognised based on a forward looking expected credit loss
model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase
in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since
initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised.
For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net
basis are recognised.
Cash and cash equivalents
Cash and cash equivalents are carried in the statement of financial position at cost. For the purpose of the cash flow statement,
cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short term highly liquid investments with
a maturity of three months or less at the date of purchase.
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
The group does not currently have any financial liabilities carried at Fair value through Profit and loss.
Special warrant liability
A contract that could result in the delivery of a variable number of the Company’s own ordinary shares is considered a financial
liability and is measured at fair value through profit and loss. During the year the Company completed the private placement of
special warrants. At the transaction date a liability was recognised because the shares had not been issued but had been paid
for. The charge to the statement of comprehensive income reflects the liability was marked to market. When the warrants were
exercised the liability was extinguished and recognised in equity. Refer to note 22 for the details of the transaction.
Other financial liabilities
Financial liabilities are subsequently measured at amortised cost using the effective interest method, except for financial liabilities
designated at fair value through profit or loss, that are carried subsequently at fair value with gains and losses recognised in the
profit and loss statement.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability, or, where appropriate, a shorter period.
Strategic Report
Corporate Governance
Financial Statements
The Group’s financial liabilities initially measured at fair value and subsequently recognised at amortised cost include accounts
payables and accrued liabilities as well as the Group’s Royalty liability.
2.10 TAXATION
The tax credit or expense for the period comprises current and deferred tax. Tax is recognised in the Income Statement, except
to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity, respectively.
The charge for current tax is calculated on the basis of the tax laws enacted or substantively enacted by the end of the reporting
period in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is accounted for using the liability method in respect of temporary differences arising from differences between the
carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is
not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred
tax assets are recognised on tax losses carried forward to the extent that the realisation of the related tax benefit through future
taxable profits is probable.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Deferred tax is calculated at the tax rates (and laws) that have been enacted or substantively enacted by the Statement of Financial
Position date and are expected to apply to the period when the asset is realised or the liability is settled.
Deferred tax assets and liabilities are not discounted.
2.11 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.
2.12 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.
2.13 LEASES
All leases are accounted for by recognising a right-of-use assets due to a lease liability except for:
> Lease of low value assets; and
> Leases with duration of 12 months or less
The Group has such short duration leases and lease payments are charged to the income statement with the exception of the
Group’s lease for the Belo Horizonte office.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily
determinable, in which case the group’s incremental borrowing rate on commencement of the lease is used. Variable lease
payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable
lease payments are expensed in the period to which they relate.
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On initial recognition, the carrying value of the lease liability also includes:
~ amounts expected to be payable under any residual value guarantee;
~ the exercise price of any purchase option granted in favour of the group if it is reasonably certain to assess that option;
~ any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option
being exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and
increased for:
~ lease payments made at or before commencement of the lease;
~ initial direct costs incurred; and
~ the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the leased asset
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over
the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than
the lease term.
2.14 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.
2.15 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”).
2.16 FINANCE INCOME
Interest income is recognised using the effective interest method, taking into account the principal amounts outstanding and the
interest rates applicable.
2.17 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.
The company has contingent consideration arising in respect of mineral asset acquisitions. Details are disclosed in note 4.2.
Strategic Report
Corporate Governance
Financial Statements
Restoration, Rehabilitation and Environmental Provisions
Management uses its judgement and experience to provide for and amortise the estimated mine closure and site rehabilitation over
the life of the mine. Provisions are discounted at a risk-free rate and cost base inflated at an appropriate rate. The ultimate closure
and site rehabilitation costs are uncertain and cost estimates can vary in response to many factors including changes to relevant
legal requirements or the emergence of new restoration techniques. The expected timing and extent of expenditure can also
change, for example in response to changes in ore reserves or processing levels. As a result, there could be significant adjustments
to the provisions established which could affect future financial results. Currently there is no provision as all restoration and
rehabilitation for activities undertaken to date are in line with the agreements for access to land. Once construction and mining
operations commence however this is anticipated to become more significant.
Trade and other payables
Accounts payable and other short term monetary liabilities, are initially recognised at fair value, which equates to the transaction
price, and subsequently carried at amortised cost using the effective interest method.
3 FINANCIAL RISK MANAGEMENT
The Group is exposed through its operations to the following financial risks:
~ Credit risk
~ Interest rate risk
~ Foreign exchange risk
~ Price risk, and
~ Liquidity risk.
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no
substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those
risks or the methods used to measure them from previous periods unless otherwise stated in this note.
(i) Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
~ Trade and other receivables
~ Cash and cash equivalents
~ Trade and other payables
~ Royalty finance
~ Derivative financial assets
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 or various forms of debt funding. Liquidity risk arises from the
Group’s management of working capital and the expenditure profile of the group. At present the Group does not have any finance
charges and principal repayments that require settlement as the only liabilities it has are contingent upon reaching production.
There is however a risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group’s policy
is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it
seeks to maintain cash balances (or agreed facilities) to meet expected requirements for a period of at least 6 months. All cash, with
the exception of that required for immediate working capital requirements, is held on short-term deposit.
The Board receives rolling 12-month cash flow projections on a quarterly basis as well as information regarding cash balances
and (as noted above) the value of the Group’s deposits. At the end of the financial year, these projections indicated that the Group
expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances. The liquidity risk
of each group entity is managed centrally by the group treasury function. Each operation has a facility with group treasury, the
amount of the facility being based on budgets. The budgets are set locally and agreed by the board in advance, enabling the Group’s
cash requirements to be anticipated.
72
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73
The following table sets out the contractual maturities of undiscounted financial liabilities:
Group
At 31 December 2021
Trade & other payables
Royalty financing arrangement
Contingent consideration
Deferred consideration
Lease liabilities
Total
Up to 3
Months
£
Between
3 & 12 Months
£
Between
1 & 2 Years
£
Between
2 & 5 Years
£
Over 5 years
£
16,008,280
—
—
—
15,949
—
—
—
451,863
—
—
2,375,269
18,236,231
168,625,617
—
4,452,029
3,710,024
704,905
47,846
704,905
3,339,022
69,408
206,932
—
—
16,024,229
752,750
3,601,445
26,234,215
172,335,641
The cash flows related to the royalty finance represent the estimated future payments in future years.
At 31 December 2020
Trade & other payables
Royalty financing arrangement
Contingent consideration
Lease liabilities
Total
Up to 3 Months
Between
3 & 12 Months
Between
1 & 2 Years
Between
2 & 5 Years
Over 5 years
£
632,407
—
—
—
632,407
£
—
—
—
—
—
£
—
—
—
—
£
—
£
—
9,263,974
148,448,937
3,659,485
4,391,382
—
—
— 12,923,459
152,840,319
The cash flows related to the royalty finance represent the estimated future payments in future years.
Company
At 31 December 2021
Trade & other payables
Intercompany loans
Contingent consideration
Total
At 31 December 2020
Trade & other payables
Intercompany loans
Contingent consideration
Total
Up to 3
Months
£
Between
3 & 12 Months
£
Between
1 & 2 Years
£
Between
2 & 5 Years
£
Over 5 years
£
12,081,730
2,828,205
—
14,909,936
—
—
—
—
—
—
—
—
—
—
—
—
4,452,029
3,710,024
4,452,029
3,710,024
Up to 3 Months
Between
3 & 12 Months
Between
1 & 2 Years
Between
2 & 5 Years
Over 5 years
£
280,179
12,194,094
—
12,474,273
£
—
—
—
—
£
—
—
—
—
£
—
—
£
—
—
3,659,485
4,391,382
3,659,485
4,391,382
(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.
Strategic Report
Corporate Governance
Financial Statements
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 2021, if the Brazilian Real had weakened/strengthened by 20% against Pound Sterling with all other variables held
constant, post tax loss for the year would have been approximately £4,235,376 (2020: £1,204,049) lower/higher mainly as a result
of foreign exchange losses/gains on translation of Brazilian Real expenditure and denominated bank balances. If the USD:GBP rate
had increased by 5% the effect would be £232,398 (2020: £372,488).
As of 31 December 2021 the Group's net exposure to foreign exchange risk was as follows:
Group
Currency of net
Financial assets/
(liabilities)
GBP
USD
BRL
CAD
EUR
Functional Currency
USD
2021
£
USD
2020
£
GBP
2021
£
GBP
2020
£
BRL
2021
£
BRL
2020
£
Total
2021
£
Total
2020
£
(933,874)
—
—
—
—
— (933,874)
—
—
— 90,206,582
(1,440,779)
(4,062,876)
— 86,143,706
(1,440,779)
14,675,359 5,433,840
—
—
—
— 6,986,953
57,683
12,830
72,610
—
—
—
—
—
— 14,675,359
5,433,840
— 6,986,953
—
12,830
57,683
72,610
Total net exposure 13,754,315 5,506,450
97,193,535
(1,383,096)
(4,062,876)
— 106,884,974
4,123,354
Company
Currency of net
Financial assets/(liabilities)
USD
CAD
Total net exposure
GBP
2021
£
GBP
2020
£
Total
2021
£
Total
2020
£
90,037,823
(1,569,868)
90,037,823
(1,569,868)
6,958,850
30,000
6,958,850
30,000
96,996,673
(1,539,868)
96,996,673
(1,539,868)
(c) Interest rate risk
As the Group has no drawn down 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) Commodity price risk
The group is exposed to the price fluctuation of its primary product from the Araguaia project, being FerroNickel. The Group has
a royalty over its Araguaia project which is denominated as a fixed percentage of the product over a certain number of tonnes
produced. Given the Group is currently in the development phase and is not yet producing any revenue, the costs of managing
exposure to commodity price risk exceed any potential benefits. The Directors monitor this risk on an ongoing basis and will
review this as the group moves towards production. The Groups exposure to nickel price amounted to the carrying value of the
Royalty liability of £33,016,624 (2020: £22,053,341). If the long term nickel price assumption used in the estimation were to
increase or decrease by 10% then the effect on the carrying value of the liability would be an increase/decrease of £3,409,321
(2020: £2,279,818).
(e) Credit risk
Credit risk arises from cash and cash equivalents and outstanding receivables including intercompany loan receivable balances. The
Group maintains cash and short-term deposits with a variety of credit worthy financial institutions and considers the credit ratings
of these institutions before investing in order to mitigate against the associated credit risk.
The Company’s exposure to credit risk amounted to £156,186,302 (2020: £10,935,563) and represents the Group cash positions.
The Company’s exposure to credit risk amounted to £217,170,961 (2020: £70,001,110). Of this amount £69,811,932
(2020: £64,692,156) is due from subsidiary companies and £147,359,029 represents cash holdings (2020: £5,308,954). See note 30
for adjustments for provisions for expected credit losses for the intercompany receivables from subsidiary companies.
74
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75
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
repayable debt at 31 December 2021 and defines capital based on the total equity of the Group. The Group monitors its level of
cash resources available against future planned exploration and evaluation activities and may issue new shares in order to raise
further funds from time to time.
As indicated above, the Group holds cash reserves on deposit at several banks and in different currencies until they are required and
in order to match where possible with the corresponding liabilities in that currency.
3.3 FAIR VALUE ESTIMATION
The carrying values of trade receivables and payables are assumed to be approximate to their fair values, due to their short-term
nature. The value of contingent and deferred 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.
In 2019 the Group entered into a royalty funding arrangement with Orion Mine Finance securing a gross upfront payment of
$25,000,000 before fees in exchange for a royalty over the first 426k tonnes of nickel produced from the Araguaia Ferronickel
project. The agreement includes several prepayment options embedded within the agreement enabling the Group to reduce the
royalty rate, these options are carried at fair value. Details of this agreement are included in note 20.
The future expected nickel price and, volatility of the nickel prices are key estimates that are critical in the fair value of the Buy Back
Option associated with the Royalty financing.
The fair value of cash, other receivables, accounts payable and accrued liabilities and the joint venture obligation approximate their
carrying values due to the short-term nature of the instruments.
Fair value measurements recognised in the statement of financial position subsequent to initial fair value recognition can be
classified into Levels 1 to 3 based on the degree to which fair value is observable.
Level 1 – Fair value measurements are those derived from quoted prices in active markets for identical assets and liabilities.
Level 2 – Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly, or indirectly.
Level 3 – Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data.
Information relating to the basis of determination of the level 3 fair value for the buyback option and consideration of sensitivity to
changes in estimates is disclosed in note 20b).
There were no transfers between any levels of the fair value hierarchy in the current or prior years.
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 judgements include, but are not limited to:
ESTIMATES
Company – Application of the expected credit loss model prescribed by IFRS 9
IFRS 9 requires the Parent company to make assumptions when implementing the forward-looking expected credit loss
model. This model is required to be used to assess the intercompany loan receivables from the company’s Brazilian subsidiaries
for impairment.
Arriving at the expected credit loss allowance involved considering different scenarios for the recovery of the intercompany loan
receivables, the possible credit losses that could arise and the probabilities for these scenarios. The following was considered; the
exploration project risk for Vermelho as well as the potential economics as derived from the PFS, positive NPV of the Araguaia
projects as demonstrated by the Feasibility Study, ability to raise the finance to develop the projects, ability to sell the projects,
market and technical risks relating to the project, participation of the subsidiaries in the Araguaia projects. See note 30 for a
discussion on the adjustment passed concerning the impairment loss.
Strategic Report
Corporate Governance
Financial Statements
Valuation of derivative financial assets
Valuing derivatives inherently relies on a series of estimates and assumptions to derive what is deemed to be a fair value estimate
for a financial instrument. The royalty financing arrangement entered into by the Group includes a Buyback option, an embedded
derivatives which was valued using a Monte Carlo simulation method. This methodology of determining fair value is reliant upon
estimations including the probability of certain scenarios occurring, the estimated production rate and timeline of production from
the Araguaia project, future nickel prices as well as discount factors. The most important estimates in determining the valuation
of the Buyback option are the future nickel price and its price volatility. The sensitivity of the valuation to these estimates are
considered in note 20b).
JUDGEMENTS
4.1 IMPAIRMENT OF EXPLORATION AND EVALUATION COSTS
Exploration and evaluation costs which relate solely to Vermelho have a carrying value at 31 December 2021 of £5,949,649 (2020:
£6,062,624). Each exploration project is subject to an annual review by either a consultant or senior company geologist to determine
if the exploration results returned to date warrant further exploration expenditure and have the potential to result in an economic
discovery. This review takes into consideration long-term metal prices, anticipated resource volumes and grades, permitting
and infrastructure. In the event that a project does not represent an economic exploration target and results indicate there is no
additional upside, a decision will be made to discontinue exploration. The judgement exercised by management relates to whether
there is perceived to be an indicator of impairment and that management have concluded that there is not, due to the recovery in
the Nickel prices, favourable economics of the Pre-Feasibility Study as well as the fundamentals of the nickel market and expected
supply gap in the mid-term.
4.2 CONTINGENT AND DEFERRED CONSIDERATION
Contingent consideration has a carrying value of £4,996,761 and deferred consideration has a carrying value of £4,062,876 at 31
December 2021 (2020: £5,927,026). There are two contingent consideration arrangements in place as at 31 December 2021:
~ Payable to Glencore in respect of the Araguaia acquisition - $5m
~ Payable to Vale in respect of the Vale acquisition - $6m
The deferred consideration arrangement in place as at 31 December 2021 is payable to Companhia Brasileira de Alumino (CBA) in
respect of plant equipment.
In prior years Management judged that the projects had advanced to a stage that it was probable that the consideration would be
paid and so should be recognised in full. This remains the position. In addition, a key estimate in determining the estimated value
of the contingent and deferred consideration for Glencore Vale and CBA is the timing of the assumed date of first commercial
production. Please refer to Note 19 for an analysis of the contingent and deferred consideration.
4.3 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 carrying value gains in exploration assets arising on the acquisitions of Araguaia
Níquel Metais Ltda (formerly Teck Cominco Brasil S.A) and Lontra Empreendimentos e Participações Ltda in 2010. A deferred tax
asset in respect of the losses has been recognised on acquisition of Araguaia Níquel Metais Ltda to the extent that it can be set
against the deferred tax liability arising on the fair value gains. In determining whether a deferred tax asset in excess of this amount
should be recognized management must make an assessment of the probability that the tax losses will be utilized and a deferred
tax asset is only recognised if it is considered probable that the tax losses will be utilized.
Other estimates include but are not limited to future cash flows associated with assets, useful lives for depreciation and fair value
of financial instruments.
76
H ORIZ ONTE M INERALS
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HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
77
Strategic Report
Corporate Governance
Financial Statements
2020
Intragroup sales
Administrative expenses
Fair value movement
Profit/(loss) on foreign exchange
UK
2020
£
Brazil
2020
£
Netherlands
2020
£
219,884
(2,488,200)
(219,884)
(292,492)
—
—
1,491,281
(547,877)
—
(169,044)
(2,949,736)
(424,500)
(192,091)
(424,500)
751,313
Total
2020
£
—
Loss from operations per reportable segment
(777,035)
(1,060,253)
(785,635)
(2,622,923)
Finance income
Loss before taxation
Depreciation charges
Additions to non-current assets
Capitalisation of borrowing costs
Reportable segment assets
Reportable segment non-current assets
Reportable segment liabilities
236,986
—
—
236,986
(540,049)
(1,060,253)
(785,635)
(2,385,937)
—
—
—
—
4,017,419
2,100,521
—
—
—
—
4,017,419
2,100,521
5,405,150
42,658,017
1,960,308
50,023,475
— 37,060,819
— 37,060,819
5,927,122
346,127
22,059,443
28,332,692
Inter segment revenues are calculated and recorded in accordance with the underlying intra group service agreements.
6 EXPENSES BY NATURE
Group
Employment related costs
Professional fees
Exploration costs expensed
Other
Total administrative expenses
2021
£
2020
£
3,818,517
1,067,047
1,119,158
1,093,299
—
740,675
343,695
445,695
5,678,350
2,949,736
4.4 ACCOUNTING FOR THE ROYALTY FINANCE ARRANGEMENTS
The Group has a $25m royalty funding arrangement which was secured in order to advance the Araguaia project towards
construction. The royalty pays a fixed percentage of revenue to the holder for production from the first 426k tonnes of nickel
produced from the Araguaia project. The treatment of this financing arrangement as a financial liability, calculated using the
effective interest rate methodology is a key judgement that was made by the Company in the prior year and which was taken
following obtaining independent expert advice. The carrying value of the financing liability is driven by the expected future
cashflows payable to the holder on the basis of the production profile of the mine property. It is also sensitive to assumptions
regarding the royalty rate, which can vary based upon the start date for construction of the project and future nickel prices.
The contract includes certain embedded derivatives, including the Buy Back Option which has been separated and carried at fair
value through profit and loss.
The future price of nickel and date of commencement of commercial production are key estimates that are critical in the
determination of the carrying value of the royalty liability.
The future expected nickel price and, volatility of the nickel prices are key estimates that are critical in the determination of the fair
value of the Buy Back Option associated with the Royalty financing.
Further information relating to the accounting for this liability, the embedded derivative and the sensitivity of the carrying value to
these estimates is provided in note 20a) and 20b).
4.5 DETERMINATION OF COMMENCEMENT OF CAPITALISATION OF BORROWING COSTS
The date at which the Group commenced capitalisation of borrowing costs was determined to be the point at which the Araguaia
Project moved forwards with undertaking an exercise of value engineering to get the project construction ready. This was deemed
by management to be at the start of 2020.
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 separate subsidiary responsible for the project finance for the Araguaia Project is domiciled in the Netherlands. The operations
of this entity are reported separately and so it is recognised as a new segment. The reports used by the chief operating decision-
maker are based on these geographical segments.
2021
Intragroup sales
Administrative expenses
Change in fair value of special warrant liability
Change in fair value of derivative
Profit/(loss) on foreign exchange
UK
2021
£
—
Brazil
2021
£
—
Netherlands
2021
£
—
Total
2021
£
—
(4,733,000)
(814,054)
(131,295)
(5,678,349)
(1,174,796)
—
—
—
— (1,174,796)
1,853,282
1,853,282
(405,739)
26,171
(247,577)
(627,145)
Loss from operations per reportable segment
(6,313,536)
(787,883)
1,474,410
(5,627,009)
Net finance income/(cost)
Loss before taxation
Depreciation charges
Additions to non-current assets
Capitalisation of borrowing costs
Foreign exchange movements to non-current assets
Reportable segment assets
Reportable segment non-current assets
Reportable segment liabilities
1,012,324
(136,516)
(4,919,602)
(4,043,794)
(5,301,212)
(924,399)
(3,445,192)
(9,670,803)
—
16,973
— 18,374,202
—
5,248,379
— (2,144,027)
—
16,973
— 18,374,202
—
5,248,379
— (2,144,027)
157,332,695
67,807,925
3,784,931
228,925,551
— 58,829,158
— 58,829,158
17,078,491
8,717,383
33,022,850
58,818,724
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2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
79
7 AUDITOR REMUNERATION
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor
and its associates:
Group
Fees payable to the Company’s auditor and its associates for the audit of the parent company and
consolidated financial statements
Fees payable to the Company’s auditor and its associates for other services:
- Audit of subsidiaries
- Audit related assurance services
- Tax compliance services
8 FINANCE INCOME AND COSTS
Group
Finance income:
2021
£
71,935
10,239
105,000
24,932
2020
£
64,700
10,000
35,000
35,244
2021
£
2020
£
Strategic Report
Corporate Governance
Financial Statements
Reconciliation of current tax
Group
Loss before income tax
Current tax at 19% (2020: 19%)
Effects of:
Expenses not deducted for tax purposes
Tax losses carried forward for which no deferred income tax asset was recognised
Prior year adjustment
Effect of higher overseas tax rates
Total tax
No tax charge or credit arises on the loss for the year.
2021
£
2020
£
(9,670,803)
(2,385,936)
(1,837,453)
(453,328)
735,916
1,334,505
—
(232,968)
—
255,888
83,060
(51,071)
114,380
(51,071)
The corporation tax rate in Brazil is 34%, the Netherlands 25% and the United Kingdom 19%. The group incurred expenses in all of
these jurisdictions during the year. The effective tax rate for the year was 23% (2020: 19%).
Deferred income tax
- Interest income on cash and short-term bank deposits
363,923
151,459
An analysis of deferred tax assets and liabilities is set out below.
Finance costs:
- Interest on land acquisitions
- Contingent consideration: unwinding of discount (note 19)
- Contingent consideration: change in carrying value (note 19)
- Contingent consideration: change in estimate (note 19)
- Amortisation of Royalty financing (note 20)
- Carrying Value adjustment on royalty (note 20)
Total finance costs
Less finance costs capitalised
Net finance costs
9 INCOME TAX
Group
Tax charge:
Current tax charge for the year
Deferred tax charge for the year
Tax on loss for the year
(122,228)
(427,804)
(74,927)
1,419,978
—
(445,066)
764,109
—
(3,316,259)
(3,244,873)
(7,134,856)
910,834
(9,292,173)
(1,863,537)
5,248,379
4,043,794
2,100,521
236,986
2021
£
2020
£
—
—
—
(51,071)
159,597
108,526
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
Adjustment to deferred tax
At 31 December
2021
£
—
—
—
2021
£
—
—
—
—
2020
£
1,624,891
1,624,891
—
2020
£
(212,382)
52,785
159,597
—
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 in a business combination.
The Group has tax losses of approximately £16,612,453 (2020: £17,603,004) in Brazil and excess management charges of
approximately £6,866,179 (2020: £2,288,011) in the UK available to carry forward against future taxable profits. Deferred tax
assets have been recognised up to the amount of the deferred tax liability arising on the fair value adjustments. Potential deferred
tax assets of £4,460,940 (2020: £6,419,743) have not been recognised.
Tax losses are available indefinitely.
80
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
81
10 INTANGIBLE ASSETS
Intangible assets comprise exploration licenses, exploration and evaluation costs and goodwill. Exploration and evaluation costs
comprise acquired and internally generated assets.
11 PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 1 January 2020
Transfer to PPE
Additions
Exchange rate movements
Net book amount at 31 December 2020
Additions
Amortisation for the year
Exchange rate movements
Exploration
Licenses
Exploration and
evaluation
costs
£
£
Goodwill
£
210,585
5,157,366
1,689,495
—
—
—
—
—
—
(52,337)
158,248
(151,785)
(632,451)
5,005,581
1,057,043
Software
£
—
—
—
—
—
—
—
76,768
155,262
—
—
68,646
(1,861)
Total
£
7,057,446
—
—
(836,574)
6,220,872
300,676
(1,861)
(9,005)
(292,612)
(52,393)
—
(354,010)
Net book amount at 31 December 2021
149,243
4,789,737
1,159,912
66,785
6,165,677
(a) Exploration and evaluation assets
The exploration licences and exploration and evaluation costs relate to the Vermelho project. No indicators of impairment were
identified during the year for the Vermelho project.
Vermelho
In January 2018, the acquisition of the Vermelho project was completed, which resulted in a deferred consideration of $1,850,000
being recognised and accordingly an amount of £1,245,111 was capitalised to the exploration licences held within intangible assets
shown above.
On 17 October 2020 the Group published the results of a Pre-Feasibility Study on the Vermelho Nickel Cobalt Project, which
confirms Vermelho as a large, high-grade resource, with a long mine life and low-cost source of nickel sulphate for the battery
industry.
The economic and technical results from the study support further development of the project towards a full Feasibility Study and
included the following:
~ A 38-year mine life estimated to generate total cash flows after taxation of US$7.3billion;
~ An estimated Base Case post-tax Net Present Value1 (‘NPV’) of US$1.7 billion and Internal Rate of Return (‘IRR’) of 26%;
~ At full production capacity the Project is expected to produce an average of 25,000 tonnes of nickel and 1,250 tonnes of cobalt per
annum utilising the High-Pressure Acid Leach process;
~ The base case PFS economics assume a flat nickel price of US$16,400 per tonne (‘/t’) for the 38-year mine life;
~ C1 (Brook Hunt) cash cost of US$8,020/t Ni (US$3.64/lb Ni), defines Vermelho as a low-cost producer; and
~ Initial Capital Cost estimate is US$652 million (AACE class 4).
Nothing has materially deteriorated with the economics of the PFS between the publication date and the date of this report and the
Directors undertook an assessment of impairment through evaluating the results of the PFS along with recent market information
relating to capital markets and nickel prices and judged that there are no impairment indicators with regards to the Vermelho
Project. Nickel prices remain higher than they were at the time of the publication of the PFS and overall sentiment towards battery
metals and supply materials have grown more positive over the current year. The BRL has depreciated during the year which could
have a positive impact on economics of the project as the revenue is denominated in USD with a significant portion of the costs and
capital expenditure denominated in BRL. It has been therefore concluded there are no indicators if impairment.
(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.
Strategic Report
Corporate Governance
Financial Statements
Mine
Development
Property
Vehicles and
other field
equipment
Office
equipment
Land
acquisition
£
£
£
£
Total
£
32,260,061
4,008,719
2,100,521
—
(7,662,482)
30,706,819
9,890,044
5,248,379
—
—
(1,757,108)
44,088,134
—
—
—
—
—
—
—
—
—
—
106,722
1,234
—
(5,806)
(25,162)
76,988
563,534
—
481
—
(4,369)
636,635
106,239
6,121
(38,224)
(16,959)
57,177
5,584
164
—
(3,243)
59,682
576,953
19,811
14,424
55,989
—
—
(13,052)
57,361
51,925
—
(481)
(1,028)
(3,255)
— 32,381,207
87,257
4,153,199
—
—
2,100,521
(5,806)
— (7,700,717)
87,257
30,928,425
7,568,023
18,073,526
—
—
—
5,248,379
—
(1,028)
(4,965)
(1,769,697)
104,523
7,650,315
52,479,605
14,424
25,275
—
(8,399)
31,300
9,527
(164)
(125)
(1,776)
38,762
65,761
26,061
—
—
—
—
—
—
—
—
—
—
120,663
31,396
(38,224)
(25,358)
88,477
15,111
—
(125)
(5,019)
98,444
7,650,315
52,381,161
87,257
30,839,948
Group
Cost
At 31 December 2019
Additions
Interest capitalized
Disposals
Foreign exchange movements
At 31 December 2020
Additions
Interest capitalized
Transfers
Disposals
Foreign exchange movements
At 31 December 2021
Accumulated depreciation
At 31 December 2019
Charge for the year
Disposals
Foreign exchange movements
At 31 December 2020
Charge for the year
Transfers
Disposals
Foreign exchange movements
At 31 December 2021
Net book amount as at 31 December 2021
Net book amount as at 31 December 2020
44,088,134
30,706,819
In December 2018, a Canadian NI 43-101 compliant Feasibility Study (FS) was published by the Company regarding the enlarged
Araguaia Project which included the Vale dos Sonhos deposit acquired from Glencore. The financial results and conclusions of the
FS clearly indicate the economic viability of the Araguaia Project with an NPV of $401M using a nickel price of $14,000/t Ni. Nothing
material had changed with the economics of the FS between the publication date and the date of this report and the Directors
undertook an assessment of impairment through evaluating the results of the FS along with recent market information relating to
capital markets and nickel prices and judged that there are no impairment indicators with regards to the Araguaia Project.
Impairment assessments 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 NPV has been determined by reference to the FS undertaken on the Araguaia Project. The key inputs and assumptions in
deriving the value in use were, the discount rate of 8%, which is based upon an estimate of the risk adjusted cost of capital for
the jurisdiction, capital costs of $443 million, operating costs of $8,194/t Nickel, a Nickel price of US$14,000/t and a life of mine
of 28 years.
82
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
83
During the year progress was made in the land acquisition process for the Araguaia project. The deposits were paid to secure the
‘right of way’, these acquisitions amounted to £7.6million. £3.5million of the land and ‘right of way’ purchases is included in trade and
other payables as at 31 December 2021.
Sensitivity to changes in assumptions
For the base case NPV of the Araguaia Project of US$401 million using a nickel price of US$14,000/t and US$740 million using
US$16,800/t as per the FS to be reduced to the book value of the Araguaia Project as at 31 December 2021, the discount rate
applied to the cash flow model would need to be increased from 8% to 17%.
14 SHARE CAPITAL
Group and Company
Issued and fully paid
Ordinary shares of 1p each
At 1 January
Issue of ordinary shares
2021
Number
2021
£
2020
Number
2020
£
1,449,377,287
14,493,773 1,446,377,287
14,463,773
2,264,928,203
22,649,282
3,000,000
30,000
Strategic Report
Corporate Governance
Financial Statements
12 TRADE AND OTHER RECEIVABLES
VAT and other taxes receivable
Deposits
Other receivables
Group
2021
£
887,920
8,000
9,341,247
2020
£
262,539
8,000
Company
2021
£
414,353
8,000
—
9,341,247
2020
£
88,196
8,000
—
10,237,167
270,539
9,763,600
96,196
Other receivables relates to transaction costs for the US$633million financing package concluded in December 2021. These
transaction costs relate to the debt finance agreements and the transaction costs will be offset against the debt when it is
drawndown.
13 CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Short-term deposits
Group
2021
£
2020
£
Company
2021
£
2020
£
153,054,239
6,756,255
144,226,966
1,129,646
3,132,063
4,179,308
3,132,063
4,179,308
156,186,302
10,935,563
147,359,029
5,308,954
The Group’s cash at bank and short-term deposits are held with institutions with the following credit ratings:
A+
A
AAA
BAA
BB
BB-
BBB+
B+
NA
Group
2021
£
2020
£
Company
2021
£
2020
£
147,315,486
5,264,882
147,308,088
5,251,913
86,038
—
—
—
8,504,893
50,941
112,006
116,938
245,517
4,522,146
57,041
735,807
—
—
—
110,170
—
—
—
—
—
50,941
—
—
—
—
57,041
—
—
—
—
—
156,186,302
10,935,563
147,359,029
5,308,954
The cash deposited with the institution with no credit rating is only held short term and the expected credit loss is not assessed
as material.
Conversion of special warrants into shares
88,060,100
880,601
—
—
At 31 December
3,802,365,590
38,023,656 1,449,377,287
14,493,773
Share capital comprises amount subscribed for shares at the nominal value.
2021
On 19 February 2021, 162,718,353 new ordinary shares were placed with new and existing investors at a price of 7.5 pence per
share. The gross proceeds raised in the placement was £12,203,876 and issue costs amounted to £740,401.
On 14 April 2021, the 88,060,100 Special Warrants were converted to 88,060,100 ordinary shares of the Company, refer to note 11
for more details on the Special Warrants.
On 23 December 2021, 2,102,209,850 new ordinary shares were placed with new and existing investors at a price of 7.0 pence per
share. The gross proceeds raised in the placement was £147,230,250 and issue costs amounted to £5,164,623.
2020
On 3 September 2020 the Group issued 3,000,000 new ordinary shares at a price of 3.1 pence per share in relation to the exercise of
options by an employee of the Company.
15 SHARE PREMIUM
Group and Company
At 1 January
Premium arising on issue of ordinary shares
Issue costs
Premium arising on conversion of special warrants into shares
Special warrants issue costs
At 31 December
2021
£
2020
£
41,848,306
41,785,306
136,784,844
(5,904,761)
5,795,235
(594,975)
63,000
—
—
—
177,928,649
41,848,306
Share premium comprises the amount subscribed for share capital in excess of nominal value.
16 SHARE-BASED PAYMENTS
The Directors have discretion to grant options to the Group employees to subscribe for Ordinary shares up to a maximum of 10%
of the Company’s issued share capital. 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.
84
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
85
Movements on number of share options and their related exercise price are as follows:
Outstanding at 1 January
Forfeited
Exercised
Granted
Outstanding at 31 December
Exercisable at 31 December
Number of
options
2021
125,350,000
(11,050,000)
—
—
Weighted
average
exercise
price 2021
£
Number of
options
2020
0.051
136,300,000
0.139
(7,950,000)
— (3,000,000)
—
—
114,300,000
114,300,000
0.0425
125,350,000
0.0425
125,350,000
Weighted
average
exercise
price 2020
£
0.055
0.140
0.031
—
0.051
0.051
17 OTHER RESERVES
Group
At 1 January 2020
Other comprehensive income
Currency translation differences
At 31 December 2020
Other comprehensive income
Currency translation differences
At 31 December 2021
The options outstanding at 31 December 2021 had a weighted average remaining contractual life of 4.47 years (2020: 5.80 years).
The fair value of the share options was determined using the Black-Scholes valuation model. No new options were issued during
2020 and 2021.
Company
At 1 January 2020 and 31 December 2020
At 1 January 2021 and 31 December 2021
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.
Other reserve
Strategic Report
Corporate Governance
Financial Statements
Merger
reserve
£
Translation
reserve
£
Other
reserve
£
Total
£
10,888,760
(14,507,590)
(1,048,100)
(4,666,930)
—
—
— (8,151,944)
—
—
— (8,151,944)
10,888,760
(22,659,534)
(1,048,100)
(12,818,874)
—
—
— (2,418,094)
—
—
— (2,418,094)
10,888,760
(25,077,628)
(1,048,100)
(15,236,968)
Merger
reserve
£
Total
£
10,888,760
10,888,760
10,888,760
10,888,760
The range of option exercise prices is as follows:
2021
Weighted
average
exercise
price
(£)
2021
Weighted
average
remaining life
expected
(years)
2021
Weighted
average
remaining life
contracted
(years)
2020
Weighted
average
exercise
price
(£)
2021
Number of
shares
2020
Weighted
average
remaining life
expected
(years)
2020
Weighted
average
remaining life
contracted
(years)
2020
Number of
shares
0.042 113,800,000
0.154
500,000
4.49
0.73
4.49
0.73
0.042 115,700,000
0.154
9,650,000
6.21
0.93
6.21
0.93
Range of
exercise prices
(£)
0–0.1
0.1–0.2
The other reserve 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.
Merger Reserve
During the year ended 31 December 2010 the Company acquired 100% of Teck Cominco Brasil S.A and Lontra Empreendimentos e
Participações Ltda (refer note 10). These acquisitions were effected by the issue of shares in Horizonte Minerals plc. These shares
qualified for merger relief under section 612 of the Companies Act 2006. In accordance with section 612 of the Companies Act 2006
the premium on the shares issued was recognised in a separate reserve within equity called merger reserve.
Currency translation differences relate to the translation of Group entities that have a functional currency different from the
presentation currency (refer note 2.8). Movements in the translation reserve are linked to the changes in the value of the Brazilian
Real against the Pound Sterling: the intangible assets of the Group are located in Brazil, and their functional currency is the Brazilian
Real, which decreased in value against Sterling during the year.
18 TRADE AND OTHER PAYABLES
Non-current
Trade and other payables
Current
Trade and other payables
Social security and other taxes
Accrued expenses
Total trade and other payables
Group
2021
£
451,863
451,863
3,381,704
572,431
12,054,145
16,008,280
16,460,143
2020
£
—
—
304,461
83,203
Company
2021
£
—
—
—
33,811
244,743
12,047,919
632,407
12,081,730
632,407
12,081,730
2020
£
—
—
123,657
31,822
124,700
280,179
280,179
86
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
87
19. CONTINGENT AND DEFERRED CONSIDERATION
19.1 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 was settled by way of issuing new shares in the Company
as follows: 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.
~ 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. Of this $330,000 is due upon the inclusion of Vale dos Sonhos in a Feasibility Study and
$670,000 for Serra do Tapa, during 2018 a Feasibility Study including Vale dos Sonhos was published and the consideration
settled by way of issuing 13,855,487 new Shares in the Company occurred during 2019. Serra do Tapa is not included in the
current project plans, therefore management have concluded it’s not currently probable that the consideration for Serra do Tapa
will be paid. This consideration is therefore not included in contingent consideration; 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 contingent consideration payable to Xstrata Brasil Mineração Ltda for the acquisition of the Araguaia project has a carrying
value of £1,713,002 at 31 December 2021 (31 December 2020: £2,893,877). It comprises US$5,000,000 consideration in cash as
at the date of first commercial production of ferronickel product (excluding the commissioning period) from any of the resource
areas covered in the purchase agreement, i.e. Vale dos Sonhos (VDS) and Serra do Tapa (SDT). The key assumptions underlying
the treatment of the contingent consideration of US$5,000,000 is a discount factor of 7.0% along with the estimated date of first
commercial production from the VDS and SDT permits. During the year the estimated date of first commercial production from
the VDS and SDT permits was revised to align with the mine plan. The Group has finalised its mine plan for the Araguaia Project
which was approved as part of the investment decision for the Araguaia project finance package which was successfully concluded
in December 2021. The mine plan anticipates production from VDS permit to commence 9 years after the Araguaia project first
production date and thus it was deemed reasonable to estimate the change in timing of the contingent consideration.
During 2020 the Araguaia project entered the development phase and as a result borrowing costs including unwinding of discount
on contingent consideration for qualifying assets are capitalised to the mine development asset.
19.2 Contingent consideration payable to Vale Metais Basicos S.A.
~ On 19 December 2017 the Company announced that it had reached an agreement with Vale S.A (“Vale”) to indirectly acquire
through wholly owned subsidiaries in Brazil, 100% of the advanced Vermelho nickel-cobalt project in Brazil (“Vermelho”).
~ The terms of the Acquisition required Horizonte to pay an initial cash payment of US$150,000 with a further US$1,850,000 in
cash payable on the second anniversary of the signing of the asset purchase agreement. This was paid by the Group in December
2019 and is no longer included in deferred consideration.
~ A final payment of US$6,000,000 in cash is payable by Horizonte within 30 days of first commercial sale of product from
Vermelho. Management have assessed that with the publication of the Pre-Feasibility Study during 2019 for the Vermelho project,
there is a reasonable probability that the project will advance through to production and therefore have recognised this contingent
consideration within liabilities for the first time during the year.
The contingent consideration payable to Vale Metais Basicos S.A. for the acquisition of the Vermelho project has a carrying value of
£3,283,758 at 31 December 2021 (31 December 2020: £3,033,148). It comprises US$6,000,000 consideration in cash as at the date
of first commercial production from the Vermelho project and was recognised for the first time in December 2019, following the
publication of a PFS on the project. The key assumptions underlying the treatment of the contingent consideration of US$6,000,000
is a discount factor of 7.0% along with the estimated date of first commercial production.
The finance costs in respect of this contingent consideration are expensed as the Vermelho project has not entered the
construction phase.
Strategic Report
Corporate Governance
Financial Statements
19.3 Deferred consideration payable to Companhia Brasileiro de Aluminio
On 8 December 2021 the Group’s subsidiary Araguaia Niquel Metais Ltda (ANM) entered into an asset purchase agreement to
purchase certain new and unused ferronickel processing equipment (the “Processing Equipment”) from Companhia Brasileira de
Alumínio (“CBA”).
The Processing Equipment comprises the key components of a conventional rotary kiln electric furnace plant (“RKEF”), excluding the
furnace, and is expected to provide meaningful synergies in relation to the development of the Araguaia ferronickel project.
An upfront cost of US$600,000 is payable in cash on signing with a total consideration of up to US$7,000,000, with the balance
payable upon the achievement of future milestones related to the development and operation of Araguaia. As part of the
transaction CBA will continue to perform care and maintenance activities going forward until it is removed from the existing site.
~ The total consideration of up to US$7 million payable by ANM will be paid according to the following schedule:US$600,000
payable on execution of the Agreement;
~ US$950,000 upon the removal of 80% of the Processing Equipment from CBA’s Niquelândia operations;
~ US$950,000 upon reaching 50% completion of Araguaia plant construction;
~ US$1,150,000 upon production at Araguaia reaching 90% of nameplate capacity for a period of 60 days, on average, and with up
to 50% of such amount payable in Horizonte shares, at Horizonte’s election; and
~ US$3,350,000 payable by Horizonte in three equal annual instalments with the first instalment due within 45 days of the first
sale of ferronickel to a third party. Horizonte may choose to pay the outstanding balance of this amount at any time of its choosing
with up to 50% of the total able to be paid in Horizonte’s shares, at Horizonte’s election.
In addition the contract provides that each component of the Purchase Price shall be deemed immediately due and payable to the
Seller at the long stop date of December 31, 2027. The deferred consideration payable to CBA has a carrying value of £4,062,876
at 31 December 2021 (31 December 2020: £nil). The key assumptions underlying the treatment of the deferred consideration of
US$7,000,000 is a discount factor of 7.0% along with the estimated date of completion of the project milestones as outlined above.
The critical assumptions underlying the treatment of the contingent and deferred considerations are set out in note 4.2.
At 1 January 2020
Unwinding of discount
Change in carrying value and foreign exchange
At 31 December 2020
Initial recognition
Unwinding of discount
Change in estimate
Change in carrying value and foreign exchange
At 31 December 2021
Reclassification to current liabilities
At 31 December 2021
Companhia
Brasileira
de Aluminio
(in respect of
Araguaia project)
£
Xstrata Brasil
Mineração Ltda
(in respect of
Araguaia project)
£
Vale Metais
Basicos S.A.
(in respect of
Vermelho project)
£
—
—
—
—
2,975,935
213,285
(295,343)
2,893,877
3,270,134
231,780
(468,766)
3,033,148
4,043,991
14,288
—
—
201,899
211,616
Total
£
6,246,069
445,065
(764,109)
5,927,025
4,043,991
427,803
—
(1,419,978)
—
(1,419,978)
4,597
4,062,876
(704,246)
3,358,630
37,204
38,994
1,713,002
3,283,758
—
—
1,713,002
3,283,758
80,795
9,059,636
(704,246)
8,355,390
The change in estimate during 2021 relates revisions to the estimated payment date of the Xstrata Brasil Mineração Ltda
contingent consideration as a result of the start date of commercial production at the VDS and SDT areas being extended.
88
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
89
20 A) ROYALTY FINANCING LIABILITY
On 29 August 2019 the Group entered into a royalty funding arrangement with Orion Mine Finance (“OMF") securing a gross upfront
payment of $25,000,000 before fees in exchange for a royalty, the rate being in a range from 2.25% to 3.00% and determined by
the date of funding and commencement of major construction. At inception of the loan the rate has been estimated at 2.65%, at
year end the rate has been revised to 2.95%. The royalty is paid over the first 426k tonnes of nickel produced from the Araguaia
Ferronickel project. The Royalty agreement has certain provisions to increase the headline royalty rate should there be delays
in securing project financing beyond a pre agreed timeframe. The royalty is linked to production and therefore does not become
payable until the project is constructed and commences commercial production. The agreement contains certain embedded
derivatives which as per IFRS9 have been separately valued and included in the fair value of the financial instrument in note 20 b).
The Royalty liability has initially been recognised using the amortised cost basis using the effective interest rate of 14.5%. When
circumstances arise that lead to payments due under the agreement being revised, the group adjusts the carrying amount of the
financial liability to reflect the revised estimated cash flows. This is achieved by recalculating the present value of estimated cash
flows using the original effective interest rate of 14.5%. any adjustment to the carrying value is recognised in the income statement.
The long-term nickel price used in the royalty valuation as at 31 December 2021 is $16,945/t Ni.
Net book amount at 1 January 2020
Unwinding of discount
Change in carrying value
Effects of foreign exchange
Net book amount at 31 December 2020
Unwinding of discount
Change in carrying value
Effects of foreign exchange
Net book amount at 31 December 2021
£
20,570,411
3,244,873
(910,834)
(851,109)
22,053,341
3,316,259
7,134,856
512,168
33,016,624
Management have sensitised the carrying value of the royalty liability by a change in the royalty rate to 3% (maximum royalty rate
in the agreement) and it would be £559,604 higher/lower and for a $1,000/t Ni increase/decrease in future nickel price the carrying
value would change by £2,011,950.
b) Derivative financial asset
The aforementioned agreement includes several options embedded within the agreement as follows:
~ If there is a change of control of the Group and the start of major construction works (as defined by the expenditure of in excess
of $30m above the expenditure envisaged by the royalty funding) is delayed beyond a certain pre agreed timeframe the following
options exist:
~ Call Option – which grants Horizonte the option to buy back between 50 – 100% of the royalty at a valuation that meets
certain minimum economic returns for OMF;
~ Make Whole Option – which grants Horizonte the option to make payment as if the project had started commercial
production and the royalty payment were due; and
~ Put Option – should Horizonte not elect for either of the above options, this put option grants OMF the right to sell between
50 – 100% of the Royalty back to Horizonte at a valuation that meets certain minimum economic returns for OMF.
~ Buy Back Option - At any time from the date of commercial production, provided that neither the Call Option, Make Whole Option
or the Put Option have been actioned, Horizonte has the right to buy back up to 50% of the Royalty at a valuation that meets
certain minimum economic returns for OMF.
The directors have undertaken a review of the fair value of all of the embedded derivatives and are of the opinion that the Call
Option, Make Whole Option and Put Option currently have immaterial values as the probability of both a change of control and
project delay are currently considered to be remote. There is considered to be a higher probability that the Group could in the future
exercise the Buy Back Option and therefore has undertaken a fair value exercise on this option.
The initial recognition of the Buy Back Option has been recognised as an asset on the balance sheet with any changes to the fair
value of the derivative recognised in the income statement. It been fair valued using a Monte Carlo simulation which runs a high
number of scenarios in order to derive an estimated valuation.
The assumptions for the valuation of the Buy Back Option are the future nickel price ($16,941/t Ni), the start date of commercial
production (May 2023), the prevailing royalty rate (2.95%), the inflation rate (1.76%) and volatility of nickel prices (22.1%).
Value as at 1 January 2020
Change in fair value
Effects of foreign exchange
Value as at 31 December 2020
Change in fair value
Effects of foreign exchange
Value as at 31 December 2021
Strategic Report
Corporate Governance
Financial Statements
£
2,246,809
(424,500)
(65,756)
1,756,553
1,853,282
63,089
3,672,924
Sensitivity analysis
The valuation of the Buyback option is most sensitive to estimates for nickel price and nickel price volatility.
An increase in the estimated future nickel price by $1,000 would give rise to a $1,338,000 increase in the value of the option.
The nickel price volatilities based on both 5 and 10 year historic prices are in close proximity and this is the period in which
management consider that the option would be exercised. Therefore, management have concluded that currently no reasonably
possible alternative assumption for this estimate would give rise to a material impact on the valuation.
21 RIGHT OF USE ASSETS AND LEASE LIABILITY
In December 2021, Araguaia Niquel Metais Ltda entered into a commercial lease agreement for an office property in Belo Horizonte.
The duration of the lease will be for 5 years. The instalments in the first year will be BRL 40,000 per month and in years 2 to 5 the
monthly instalment will be BRL 43,520.
The right of use asset and lease liability was recognised in December 2021 at inception of the lease.
Right of use asset
Initial recognition
Value as at 31 December 2021
Lease liability
Initial recognition
Reclassified to current liabilities
Non-current lease liability
£
282,320
282,320
£
282,320
(43,604)
238,716
22 SPECIAL WARRANT LIABILITY
On 9 March 2021 the Company completed the private placement of special warrants (the “Special Warrants), raising gross proceeds
of £6.7 million (the “Offering”) including the full exercise of the underwriters’ option.
Pursuant to the Offering, the Company issued 88,060,100 Special Warrants at a price of 7.5 pence per share per Special Warrant.
Each Special Warrant, subject to the Penalty Provision (as defined below) and subject to adjustments in certain circumstances,
shall be deemed to be exercised for one Ordinary Share in the capital of the Company (each, an “Underlying Share”) without any
required action on the part of the holders (including payment of additional consideration) on the date on which the earlier of the
following occurs:
(i) the third business day following the date on which a final receipt is obtained from the applicable securities regulator on behalf
of the securities regulatory authorities in each of the provinces of British Columbia and Ontario (the “Final Receipt”), for the final
qualification prospectus (the “Qualification Prospectus”) qualifying the Underlying Shares for distribution; and
(ii) 4:59 p.m. (Toronto time) on 10 July 2021.
90
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
91
The Company agreed to use commercially reasonable efforts to qualify the Underlying Shares for distribution in Canada, and to
obtain the Final Receipt therefor, on or prior to 28 April 2021. In the event the Final Receipt was not received on or before 18 April
2021, each Special Warrant entitled the holder thereof to receive, upon the exercise or deemed exercise thereof, as applicable, 1.1
Underlying Shares without further payment on the part of the holder (the “Penalty Provision”).
(b) Diluted
The basic and diluted loss per share for the years ended 31 December 2021 and 31 December 2020 are the same as the current year
result for the year was a loss, the options and warrants outstanding would be anti-dilutive. Therefore, the dilutive loss per share is
considered as the same as the basic loss per shares.
Strategic Report
Corporate Governance
Financial Statements
The Special Warrants contained terms that could have resulted in variability in the number of common shares issued, with an
increase in the conversion ratio if the final prospectus was not filed by 28 April 2021. Accordingly, the Special Warrants were
classified as a derivative financial instrument under IFRS and measured at fair value through profit and loss. On initial recognition,
the carrying value of the liability was equal to the net proceeds of £6,178,222 .
The receipt for the Final Prospectus was confirmed on 9 April 2021. On 14 April 2021, the 88,060,100 Special Warrants were
converted to 88,060,100 ordinary shares of the Company with no penalty. Upon the conversion of the Special Warrants to ordinary
shares, the fair value of the Special Warrants as at 14 April 2021 was transferred to Share Capital and Share Premium. The fair
value of the Special Warrants as at 14 April 2021, was determined to be £7,255,657. The change in fair value from the date of
issuance on 9 March 2021 to the date of exercise on 14 April 2021, an unrealised loss of $1,174,796 was recognized related to
Special Warrants.
Gross proceeds from issue of share warrants
Issue costs
Effects of change in fair value and foreign exchange
Conversion of share warrants into shares
Value as at 31 December 2021
23 NOTE TO STATEMENT OF CASH FLOWS
Below is a reconciliation of borrowings from financial transactions:
£
6,675,836
(594,975)
1,174,796
(7,255,657)
-
As at 1 January 2020
Non cash flow adjustments:
- Unwinding of discount
- Change in fair value
- Effects of foreign exchange
Royalty Financing
£
Derivative Asset
£
Total
£
20,570,411
(2,246,809)
18,323,602
3,244,873
(910,834)
(851,109)
—
424,500
65,756
3,244,873
(486,334)
(785,353)
Total non-current borrowings 31 December 2020
22,053,341
(1,756,553)
20,296,788
Unwinding of discount
Change in fair value
Effects of foreign exchange
3,316,259
7,134,856
512,168
—
(1,853,282)
(63,089)
3,316,259
5,281,574
449,079
Total non-current borrowings 31 December 2021
33,016,624
(3,672,924)
29,343,700
24 DIVIDENDS
No dividend has been declared or paid by the Company during the year ended 31 December 2021 (2020: nil).
25 EARNINGS PER SHARE
(a) Basic
The basic loss per share of 0.568p loss per share (2020 loss per share: 0.157p) 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
92
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
2021
£
2020
£
(9,670,803)
(2,277,411)
1,703,513,618
1,447,323,588
On 19 February 2021, 162,718,353 new ordinary shares were placed with new and existing investors at a price of
7.5 pence per share.
On 14 April 2021, the 88,060,100 Special Warrants were converted to 88,060,100 ordinary shares of the Company, refer to note 11
for more details on the Special Warrants.
On 23 December 2021, 2,102,209,850 new ordinary shares were placed with new and existing investors at a price of
7.00 pence per share.
On 3 September 2020 the Group issued 3,000,000 new ordinary shares at a price of 3.1 pence per share in relation to the exercise of
options by an employee of the Company.
Details of share options that could potentially dilute earnings per share in future periods are set out in note 16.
26 RELATED PARTY TRANSACTIONS
The following transactions took place with subsidiaries in the year:
Amounts totalling £5,147,750 (2020: £5,464,756) were lent to Horizonte Nickel IOM Ltd and Champol IOM Ltd finance exploration
work during 2021, by Horizonte Minerals Plc. No interest is charged on balances outstanding during the year. The amounts are
repayable on demand.
See note 30 for balances with subsidiaries at the year end.
All Group transactions were eliminated on consolidation.
27 ULTIMATE CONTROLLING PARTY
The Directors believe there to be no ultimate controlling party.
28 EMPLOYEE BENEFIT EXPENSE (INCLUDING DIRECTORS AND KEY MANAGEMENT)
Group
Wages and salaries
Social security costs
Indemnity for loss of office
Management
Field staff
Average number of employees including Directors
and Key Management
Group
2021
£
2020
£
Company
2021
£
2020
£
5.417.395
2,180,283
3,996,570
1,384,126
629,206
81,040
269,069
1,315
386,904
161,157
—
—
6,127,641
2,450,667
4,383,474
1,545,283
12
38
50
13
24
37
8
3
11
8
—
8
Employee benefit expenses includes £2,311,546 (2020: £1,110,358) of costs capitalised and included within intangible
non-current assets and mine development asset.
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
93
29 INVESTMENTS IN SUBSIDIARIES
Company
Shares in Group undertakings
2021
£
2,348,142
2,348,142
2020
£
2,348,142
2,348,142
Investments in Group undertakings are stated at cost.
On 23 March 2006 the Company acquired the entire issued share capital of Horizonte Exploration Limited by means of a share for
share exchange; the consideration for the acquisition was 21,841,000 ordinary shares of 1 penny each, issued at a premium of
9 pence per share. The difference between the total consideration and the assets acquired has been credited to other reserves.
30 LOANS TO AND FROM SUBSIDIARIES
Balances with subsidiaries at the year-end were:
Company
Loans to subsidiaries
HM Brazil (IOM) Ltd
Horizonte Nickel (IOM) Ltd
Champol (IOM) Ltd
Horizonte Minerals (IOM) Ltd
Total
Loans from subsidiaries
HM Exploration Ltd
Cluny (IOM) Ltd
Nickel Production Services B.V.
Total
2021
Assets/(Liabilities)
£
2020
Assets/(Liabilities)
£
6,297,961
58,491,543
4,769,422
253,004
6,297,961
53,530,300
4,610,891
253,004
69,811,930
64,692,156
(413,930)
—
(2,414,275)
(2,828,205)
(413,930)
(37,783)
(11,742,382)
12,194,095
The loans to Group undertakings are repayable on demand and currently carry no interest, however there is currently no
expectation of repayment within the next twelve months and therefore loans are treated as non-current.
Company
HM do Brasil Ltda
HM Brazil (IOM) Ltd
1 January
2020
£
Transfers
£
944,928
(2,173,475)
3,149,326
2,173,473
Horizonte Nickel (IOM) Ltd
35,641,959
17,409,339
Amounts
advanced
during year
£
283,619
524,962
479,003
Expected
credit loss
£
944,928
2020
£
—
450,200
6,297,961
Amounts
advanced
during year
£
—
—
— 53,530,300
4,961,243
Araguaia Niquel Metais Ltda
10,244,039 (11,434,152)
1,190,112
—
—
Horizonte Minerals (IOM) Ltd
253,004
—
—
— 253,004
Typhon Brasil Mineração Ltda
4,378,487
(7,967,759)
1,712,777
1,876,495
Trias Brasil Mineração Ltda
— (1,012,620)
— 1,012,620
—
—
—
—
—
—
Expected
credit loss
£
—
2021
£
—
— 6,297,961
— 58,491,543
—
—
— 253,004
—
—
—
—
Champol (IOM) Ltd
Cluny (IOM) Ltd
Total
— 4,150,055
1,274,283
(813,447)
4,610,891
186,507
(27,976)
4,769,422
801,403
(1,144,861)
— 343,458
—
—
—
—
55,413,146
— 5,464,746
3,814,254
64,692,156
5,147,750
(27,976) 69,811,930
Strategic Report
Corporate Governance
Financial Statements
The Gross and net intercompany loan position following the expected credit loss as each year end is set out below:
Company
HM do Brasil Ltda
HM Brazil (IOM) Ltd
Horizonte Nickel (IOM) Ltd
Araguaia Niquel Metais Ltda
Horizonte Minerals (IOM) Ltd
Typhon Brasil Mineração Ltda
Trias Brasil Mineração Ltda
Champol (IOM) Ltd
Cluny (IOM) Ltd
Total
2021
Expected
credit loss
£
Gross loan
£
Net loan
£
Gross loan
£
2020
Expected
credit loss
£
Net loan
£
—
—
—
—
—
—
8,997,087
(2,699,126)
6,297,961
8,997,087
(2,699,126)
6,297,961
58,491,543
— 58,491,543
53,530,300
— 53,530,300
—
253,004
—
—
—
—
—
—
—
—
253,004
253,004
—
—
—
—
—
—
—
—
—
253,004
—
—
5,611,085
(841,663)
4,769,422
5,424,578
(813,687)
4,610,891
—
—
—
—
—
—
73,352,719
(3,540,789)
69,811,930
68,204,969
(3,512,813)
64,692,156
Impairment provisions for receivables and loans to related parties are recognised based on using the general approach to determine
if there has been a significant increase in credit risk since initial recognition and whether the receivables and loans are credit
impaired in accordance with IFRS9.
The loan to the subsidiary companies, are classified as repayable on demand. IFRS 9 requires consideration of the expected credit
risk associated with the loans. As the subsidiary companies do not have any liquid assets to sell to repay the loan, should it be
recalled, the conclusion reached was that the loan should be categorised as credit impaired.
As part of the assessment of expected credit losses of the intercompany loan receivable, the Directors have assessed the cash
flows associated with a number of different recovery scenarios. This included consideration of the:
~ Exploration and development project risk,
~ positive NPV of the Araguaia project as demonstrated by the Feasibility Study
~ positive NPV of the Vermelho Nickel Cobalt Project demonstrated by the Pre-Feasibility Study
~ ability to raise the finance to develop the projects
~ ability to sell the projects
~ market and technical risks relating to the projects
~ participation of the subsidiaries in the Araguaia project
The directors have concluded that certain amounts may not be fully recovered giving rise to the expected credit loss adjustment.
After taking into consideration all of the above factors the rate of expected credit loss varies from 0% (2020: 0%) for the Araguaia
project, to 30% (2020: 30%) for the receivables from HM Brazil and 15% (2020: 15%) for the Vermelho Project. The reduction
in expected credit loss assessment for HM Brazil is due Araguaia’s the further progress towards development and continuing
improving prospects for Vermelho.
The credit loss allowance was assessed at the date of 31 December 2021. There was no change in the expected credit loss
allowance at the year end.
31 COMMITMENTS
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
Group
Intangible assets
2021
£
—
2020
£
7,314,000
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. The contract relating to items
of plant and equipment, which was the disclosed capital commitment at 31 December 2020, was completed in December 2021.
Refer to note 17 for the details of the agreement concluded with Companhia Brasileira de Alumínio. At the time of this report
the Group was in the process of concluding equipment purchase contracts which are key to the commencement of the Araguaia
project construction.
94
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
95
32 CONTINGENT LIABILITIES
Other Contingencies
The Group believes that there are no substantive financial claims and legal proceedings against it as at 31 December 2021. As a
result, no provision and no disclosure has been made in these financial statements for the year ended 31 December 2021.
Strategic Report
Corporate Governance
Financial Statements
34 PARENT COMPANY GUARANTEE
Horizonte Minerals plc has, together with other group companies, provided a parent guarantee to Orion Mine Finance related to the
$25 Million Royalty Financing arrangement granted by Nickel Production Services B.V. in respect of the project owned by Araguaia
Níquel Metais Ltda during the financial year. The royalty payments are conditional upon entering into commercial production
and therefore cannot become due until this is achieved. Horizonte Mineral plc’s obligation to pay under the guarantee only arises
if Nickel Production Services B.V. as grantor of the royalty or any of the other provider of a parent guarantee fails to make any
payment under the royalty agreement. The Company considers the probability of such scenarios to be minimal at the current
stage of the business’ development and therefore any fair value assessment of such potential financial liability has been deemed
to be immaterial.
35 EVENTS AFTER THE REPORTING DATE
On 15 March 2022 Araguaia Niquel Metais LTDA, a wholly owned subsidiary of the Group entered into legally binding documentation
including a comprehensive intercreditor agreement and loan agreements with two export credit agencies in relation its senior
secured project finance debt facility of US$346.2 million.
Fair Value
2021
£
Amortised
cost 2021
£
Total
2021
£
Fair Value
2020
£
Amortised
cost 2020
£
Total
2020
£
— 156,186,302 156,186,302
— 10,935,563
10,935,563
3,672,924
— 3,672,924
1,756,553
— 1,756,553
The Senior Debt Facility will include the following:
~ Commercial senior facility of US$200,000,000 provided by the Senior Lenders;
~ ECA facility of US$74,562,000 guaranteed by EKF;
~ ECA facility of US$71,638,000 guaranteed by Finnvera;
First drawdown under the Senior Debt Facility is expected to occur in the fourth quarter of 2022 following satisfaction of certain
conditions precedent customary for transactions of this nature.
On 15 March 2022 Horizonte Minerals confirmed the satisfaction of material conditions precedent in relation to the US$ 65 million
Convertible Loan Note with full draw down on this expected to follow shortly afterwards.
On 15 March 2022 Horizonte signed binding loan documentation in relation to a US$25 million Cost Overrun Facility (“COF”).
Entering into the COF is a condition precedent to first drawdown under the Senior Debt Facility. The COF will be available for
drawdown in the case of a cost overrun against the construction schedule and budget, subject to certain conditions including the
Company having deployed 90% of the funding from the equity fundraise and convertible notes toward the construction of the
Araguaia ferronickel project.
3,672,924 156,186,302 160,755,145
1,756,553
11,206,103
12,962,656
Amortised cost
2021
£
147,359,029
69,811,930
226,934,559
2020
£
5,308,954
64,692,156
70,097,306
Amortised cost
2021
£
16,460,143
4,996,761
4,062,876
33,016,624
58,536,404
Amortised cost
2021
£
12,081,730
4,996,761
2,828,205
19,906,696
2020
£
632,407
5,927,025
—
22,053,341
28,612,773
2020
£
694,110
5,927,025
11,780,164
18,401,299
33 FINANCIAL INSTRUMENTS
Financial Assets
Group
Cash and cash equivalents
Derivative financial asset
Total
Company
Cash and cash equivalents
Loans to subsidiaries
Total
Financial Liabilities
Group
Trade and other payables
Contingent consideration
Deferred consideration
Royalty Finance
Total
Company
Trade and other payables
Contingent consideration
Loans from subsidiary
Total
Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, trade and other
payables, and, contingent and deferred consideration which are discounted.
96
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
HO RIZ O NT E M INE RA LS
2021 REPORT AND ACCOUNTS
97
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)
Sepanta Dorri (Non-Executive Director)
Owen Alexander Bavinton (Non-Executive Director)
Gillian Davidson (Non-Executive Director)
Vincent Benoit (Non-Executive Director)
COMPANY SECRETARY
Simon James Retter
COMPANY NUMBER
05676866
Registered Office
Horizonte Minerals Plc
Rex House
4-12 Regents Street
London SW1Y 4RG
United Kingdom
NOMINATED ADVISER AND BROKER
Peel Hunt LLP
100 Liverpool Street
London EC2M 2AT
United Kingdom
JOINT BROKER
BMO Capital Markets Limited
95 Queen Victoria St
London EC4V 4HG
United Kingdom
INDEPENDENT AUDITOR
BDO LLP
55 Baker Street
Marylebone
London W1U 7EU
United Kingdom
SOLICITORS TO THE COMPANY
As to English law:
Norton Rose Fulbright LLP
3 More London Riverside
London
SE1 2AQ
Gowling WLG (UK) LLP
4 More London Riverside
London,
SE1 2AU
As to Canadian law:
Cassels Brock and Blackwell LLP
2100 Scotia Plaza
Toronto ON
M5H 3C2
Canada
As to Brazilian law:
Freitas Ferraz Advogados
Rua Santa Rita Durao, 1143,
7 Andar Savassi,
CEP 30.140-118
Brazil
REGISTRAR
For shares listed on the London Stock Exchange:
Computershare Investor Services (Ireland) Limited
3100 Lake Drive
Citywest Business Campus
Dublin 24
D24 AK82
Ireland
For shares listed on the Toronto Stock Exchange:
Computershare Investor Services Inc.
100 University Avenue
8th Floor
Toronto ON
M5J 2Y1
Canada
98
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
Horizonte Minerals Plc, Rex House, 4-12 Regents Street, London SW1Y 4RG, United Kingdom
T. +44 (0)203 356 2901 E. info@horizonteminerals.com www.horizonteminerals.com
Horizonte Minerals Plc, Rex House, 4-12 Regents Street, London, SW1Y 4RG, United Kingdom
+44 (0)203 356 2901 • info@horizonteminerals.com • www.horizonteminerals.com
100
100
H ORIZ ONTE M INERALS
H ORIZ ONTE M INERALS
2021 REPORT AND ACCOUNTS
2021 REPORT AND ACCOUNTS