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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Horizonte Minerals Plc | LSE:HZM | London | Ordinary Share | GB00BMXLQJ47 | ORD 20P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.05 | -10.53% | 0.425 | 0.40 | 0.45 | 0.475 | 0.425 | 0.475 | 2,610,598 | 09:00:15 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Gold Ores | 0 | -5.32M | -0.0197 | -0.24 | 1.27M |
From Apr 2021 to Apr 2024
TIDMHZM
RNS Number : 6062Y
Horizonte Minerals PLC
14 May 2021
NEWS RELEASE
14 May 2021
Quarterly Financial Results for the Three Months Ended 31 March 2021
Horizonte Minerals Plc, (AIM: HZM, TSX: HZM) (' Horizonte' or 'the Company') the nickel company focused on Brazil, announces its unaudited financial results for the three month period to 31 March 2021 and the Management Discussion and Analysis for the same period. Both of the aforementioned documents have been posted on the Company's website www.horizonteminerals.com and are also on SEDAR at www.sedar.com .
Highlights for the Period
Hot Features
Premium
-- Successful completion of a GBP18 million fundraise with predominately new institutions resulting in
a strengthened cash balance of GBP26 million.
-- Multiple components of the Araguaia project finance package reaching final stages.
-- Appointment of BMO Capital Market Limited as joint broker.
-- Appointment of Michael Drake as Head of Projects.
-- Award of power line licence to cover the full power requirement of the Araguaia project at nameplate capacity.
-- Continued support provided to local communities in response to the ongoing Covid-19 pandemic.
Post Period Events
-- Contract for the Environmental and Social Impact Assessment for the Vermelho project awarded to Ramboll.
Horizonte Minerals plc
Unaudited Amended Condensed Consolidated Interim Financial Statements for the three months ended 31 March 2021
Condensed Consolidated Statement of Comprehensive Income
3 months ended
31 March
2021 2020
------------------------------------------------------------------------------ ------ ------------ ------------
Unaudited Unaudited
Amended
(note 2)
------------------------------------------------------------------------------ ------ ------------ ------------
Notes GBP GBP
------------------------------------------------------------------------------ ------ ------------ ------------
Administrative expenses (820,802) (674,458)
Change in fair value of special warrant liability 11 (303,001) -
Gain/(loss) on foreign exchange 184,584 941,446
Loss from operations (939,219) 266,988
Net finance costs 5 (15,257) (308,510)
------------------------------------------------------------------------------ ------ ------------ ------------
Loss before taxation (954,476) (41,522)
Taxation - -
------------------------------------------------------------------------------ ------ ------------ ------------
Loss for the year from continuing operations (954,476) (41,522)
============================================================================== ====== ============ ============
Other comprehensive income Items that may be reclassified subsequently to
profit or loss
Currency translation differences on translating foreign operations (4,104,615) (6,609,872)
------------------------------------------------------------------------------ ------ ------------ ------------
Other comprehensive income for the period, net of tax (4,104,615) (6,609,872)
------------------------------------------------------------------------------ ------ ------------ ------------
Total comprehensive income for the period
attributable to equity holders of the Company (5,059,091) (6,651,394)
------------------------------------------------------------------------------ ------ ------------ ------------
Earnings per share from continuing operations attributable to the equity
holders of the Company
Basic & Diluted earnings per share (pence per share) (0.063) (0.003)
Condensed Consolidated Statement of Financial Position
31 March 31 December
2021 2020
Unaudited Audited
------------------------------ ------ ------------- -------------
Notes GBP GBP
------------------------------ ------ ------------- -------------
Assets
Non-current assets
Intangible assets 6 5,643,397 6,220,872
Property, plant & equipment 7 30,119,553 30,839,947
35,762,950 37,060,819
------------------------------ ------ ------------- -------------
Current assets
Trade and other receivables 342,875 270,540
Derivative financial
asset 10 b 1,739,635 1,756,553
Cash and cash equivalents 26,331,015 10,935,563
------------------------------ ------ ------------- -------------
28,413,525 12,962,656
------------------------------ ------ ------------- -------------
Total assets 64,176,475 50,023,475
============================== ====== ============= =============
Equity and liabilities
Equity attributable
to owners of the parent
Issued capital 8 16,120,957 14,493,773
Share premium 8 51,759,117 41,848,306
Other reserves (16,923,489) (12,818,874)
Accumulated losses (23,066,979) (22,112,503)
------------------------------ ------ ------------- -------------
Total equity 27,889,606 21,410,702
------------------------------ ------ ------------- -------------
Liabilities
Non-current liabilities
Contingent consideration 9 5,956,840 5,927,025
Royalty Finance 10 a 23,266,989 22,053,341
29,223,829 27,980,366
------------------------------ ------ ------------- -------------
Current liabilities
Trade and other payables 581,817 632,407
Special warrant liability 11 6,481,223 -
------------------------------ ------ ------------- -------------
7,063,040 632,407
------------------------------ ------ ------------- -------------
Total liabilities 36,286,869 28,612,773
------------------------------ ------ ------------- -------------
Total equity and liabilities 64,176,475 50,023,475
============================== ====== ============= =============
Condensed statement of changes in shareholders' equity
Attributable to the owners of the parent
--------------------------------------------------------------------
Share Share Accumulated Other
capital premium losses reserves Total
GBP GBP GBP GBP GBP
-------------------------- ----------- ----------- ------------- ------------- ------------
As at 1 January
2020 14,463,773 41,785,306 (19,835,092) (4,666,930) 31,747,057
-------------------------- ----------- ----------- ------------- ------------- ------------
Comprehensive income
Loss for the period - - (41,522) - (41,522)
Other comprehensive
income
Currency translation
differences - - - (6,609,872) (6,609,872)
-------------------------- ----------- ----------- ------------- ------------- ------------
Total comprehensive
income - - (41,522) (6,609,872) (6,651,394)
-------------------------- ----------- ----------- ------------- ------------- ------------
Transactions with
owners
Issue of ordinary - - - - -
shares
Total transactions - - - - -
with owners
As at 31 March 2020
(unaudited and amended,
see note 2) 14,463,773 41,785,306 (19,876,614) (11,276,802) 25,095,663
========================== =========== =========== ============= ============= ============
Attributable to the owners of the parent
--------------------------------------------------------------------
Share Share Accumulated Other
capital premium losses reserves Total
GBP GBP GBP GBP GBP
---------------------- ----------- ----------- ------------- ------------- ------------
As at 1 January
2021 14,493,773 41,848,306 (22,112,503) (12,818,874) 21,410,702
---------------------- ----------- ----------- ------------- ------------- ------------
Comprehensive income
Loss for the period - - (954,476) - (954,476)
Other comprehensive
income
Currency translation
differences - - - (4,104,615) (4,104,615)
---------------------- ----------- ----------- ------------- ------------- ------------
Total comprehensive
income - - (954,476) (4,104,615) (5,059,091)
---------------------- ----------- ----------- ------------- ------------- ------------
Transactions with
owners
Issue of ordinary
shares 1,627,184 10,576,692 - - 12,203,876
Issue costs - (665,881) - - (665,881)
Total transactions
with owners 1,627,184 9,910,811 - - 11,537,995
As at 31 March 2021
(unaudited) 16,120,957 51,759,117 (23,066,979) (16,923,489) 27,889,606
====================== =========== =========== ============= ============= ============
Condensed Consolidated Statement of Cash Flows
3 months ended
31 March
---------------------------------------------------- ---- --------------------------
2021 2020
---------------------------------------------------- --- ------------ ------------
Unaudited Unaudited
Amended
(note 2)
---------------------------------------------------- --- ------------ ------------
GBP GBP
Cash flows from operating activities
Loss before taxation (954,476) (41,522)
Finance costs 15,257 308,510
Change in fair value of special warrant liability 303,001 -
Exchange differences (184,584) (941,446)
Operating loss before changes in working capital (820,802) (674,458)
Decrease/(increase) in trade and other receivables (72,336) (2,875)
(Decrease)/increase in trade and other payables (50,590) (122,207)
----------------------------------------------------------- ------------ ------------
Net cash outflow from operating activities (943,728) (799,540)
=========================================================== ============ ============
Cash flows from investing activities
Purchase of intangible assets (26,299) -
Purchase of property, plant and equipment (1,094,769) (953,818)
Interest received 28,320 45,245
----------------------------------------------------------- ------------ ------------
Net cash used in investing activities (1,092,748) (908,573)
----------------------------------------------------------- ------------ ------------
Cash flows from financing activities
Proceeds form issue of ordinary shares 12,203,876 -
Share issue costs (665,881) -
Proceeds from issue of special warrants 6,675,836
Special warrants issue costs (497,614) -
---------------------------------------------------- --- ------------ ------------
Net cash from financing activities 17,716,217 -
---------------------------------------------------- --- ------------ ------------
Net decrease in cash and cash equivalents 15,679,741 (1,708,113)
Cash and cash equivalents at beginning of period 10,935,563 17,760,330
Exchange gain/(loss) on cash and cash equivalents (284,289) 941,447
----------------------------------------------------------- ------------ ------------
Cash and cash equivalents at end of the period 26,331,015 16,993,664
=========================================================== ============ ============
Notes to the Financial Statements
1. General information
The principal activity of the Company and its subsidiaries (together 'the Group') is the exploration and development of precious and base metals. There is no seasonality or cyclicality of the Group's operations.
The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange (AIM) and on the Toronto Stock Exchange (TSX). The Company is incorporated and domiciled in the United Kingdom. The address of its registered office is Rex House, 4-12 Regent Street, London SW1Y 4RG.
2. Basis of preparation
The condensed consolidated interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standard 34 Interim Financial Reporting. The condensed interim financial statements do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the annual financial statements for the year ended 31 December 2020, which have been prepared in accordance with International Financial Reporting Standards (IFRS).
The condensed consolidated interim financial statements set out above do not constitute statutory accounts within the meaning of section 434 (3) of the Companies Act 2006. Statutory financial statements for the year ended 31 December 2020 were approved by the Board of Directors on 31 March 2021 and delivered to the Registrar of Companies. The report of the auditors on those financial statements was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.
Amendment to prior period figures
These financial statements have been restated to include certain amendments to the figures for the 3 months to 31 March 2020. The amendments are driven by the correction of a prior period error in 2020 in respect of the capitalisation of borrowing costs (refer to note 3). In addition, certain costs have been capitalised to the Mine Development Asset that had previously been capitalised to intangible assets. None of these adjustments have a cash impact on the balance sheet.
The effect of these amendments on the statement of financial position and statement of comprehensive are set out in the table below:
Mine development Intangible
asset assets Accumulated losses
GBP GBP GBP
31 March 2020 - as previously
stated 27,055,598 7,531,221 (20,863,860)
------------------------------- ----------------- ----------- -------------------
Transfer of capitalised
costs from intangibles
assets to Mine development
asset 660,446 (660,446) -
Capitalisation of borrowing
costs 987,246 - 987,246
31 March 2020 - Amended 28,703,290 6,870,775 (19,876,614)
------------------------------- ----------------- ----------- -------------------
Reclassification
to/from finance Capitalisation Amended as
As previously income and of borrowing at
stated 31/3/20 costs costs 31/3/20
GBP GBP GBP
---------------------------- ---------------- ------------------- --------------- -----------
Statement of comprehensive
income
---------------------------- ---------------- ------------------- --------------- -----------
Administrative
expenses (674,458) - - (674,458)
Change in value
of contingent
consideration (483,010) 483,010 - -
Gain/(Loss) on
foreign exchange 941,446 - - 941,446
Loss from operations (216,022) 483,010 - 266,988
---------------------------- ---------------- ------------------- --------------- -----------
Finance income 45,245 (45,245) -
Finance costs (857,991) (483,010) 1,032,491 (308,510)
Loss before taxation (1,028,768) - 987,246 (41,522)
---------------------------- ---------------- ------------------- --------------- ----------- Taxation - - - - Loss for the year from continuing operations (1,028,768) - 987,246 (41,522) ---------------------------- ---------------- ------------------- --------------- -----------
Going concern
The condensed consolidated interim financial statements have been prepared on a going concern basis. Although the Group's assets are not generating revenues and an operating loss has been reported, the Directors consider that the Group has sufficient funds to undertake its operating activities for a period of at least the next 12 months including any additional expenditure required in relation to its current exploration projects. The Group has cash reserves which are considered sufficient by the Directors to fund the Group's committed expenditure both operationally and on its exploration project for the foreseeable future. However, as additional projects are identified and the Araguaia project moves towards production, additional funding will be required.
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 government instructions the staff presence within the Group's offices in London and Brazil has been restricted to a minimum with staff working from home where possible, international travel has stopped and all site work for the two projects has been restricted to a minimum level. However, a number of the key project milestones are still advancing and are currently on track being run by the teams in a virtual capacity.
Whilst the board considers that the effect of Covid-19 on the Group's financial results at this time is constrained to inefficiencies due to remote working, restrictions on travel and some minor potential delays to consultants work streams, the Board considers the pandemic could delay the Araguaia project financing timeline by a number of months (this will be dependent on the duration of the effects of the Covid-19 virus across global markets). However, with the current cash resources available to the Group the Directors are of the opinion that it has sufficient financing to enable the Company to continue its operations for at least 12 months should any additional cost arise as a result of any potential deterioration in the global Covid-19 situation.
As a result of considerations noted above, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing these Financial Statements.
Risks and uncertainties
The Board continuously assesses and monitors the key risks of the business. The key risks that could affect the Group's medium term performance and the factors that mitigate those risks have not substantially changed from those set out in the Group's 2020 Annual Report and Financial Statements, a copy of which is available on the Group's website: www.horizonteminerals.com and on Sedar: www.sedar.com The key financial risks are liquidity risk, foreign exchange risk, credit risk, price risk and interest rate risk.
Use of estimates and judgements
The preparation of condensed consolidated interim financial statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period. Significant items subject to such estimates are set out in note 4 of the Group's 2020 Annual Report and Financial Statements. The nature and amounts of such estimates and judgements have not changed significantly during the interim period.
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 measure's 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 above. 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.
3. Significant accounting policies
The same accounting policies, presentation and methods of computation have been followed in these condensed consolidated interim financial statements as were applied in the preparation of the Group's audited Financial Statements for the year ended 31 December 2020 except for the new accounting policy applied for the special warrant liability which is detailed below.
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 on contingent consideration payable for Araguaia
All other borrowing costs are recognized as part of interest expense in the year which they are incurred.
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 instrument and is measured at fair value through profit and loss. Refer to note 11 for the details of the Company's special warrant liability.
Impact of accounting standards to be applied in future periods
There are a number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective for periods beginning subsequent to 31 December 2021 that the Group has decided not to adopt early. The Group does not believe these standards and interpretations will have a material impact on the financial statements once adopted.
4 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 UK Brazil Netherlands Total
3 months 3 months 3 months 3 months
ended ended ended ended
31 March 31 March 31 March 31 March
2021 2021 2021 2021
GBP GBP GBP GBP
-------------------------------- ----------- -------------- -------------- --------------
Administrative expenses (693,127) (126,811) (864) (820,802)
Profit/(Loss) on foreign
exchange (172,129) - 53,712 (118,417)
Loss from operations
per reportable segment (865,256) (126,811) 52,848 (939,219)
Net finance costs (15,257) - - (15,257)
Loss before taxation (880,513) (126,811) 52,848 (954,476)
Depreciation charges - (2,878) - (2,878)
Additions to non-current
assets - 1,121,068 - 1,121,068
Capitalisation of borrowing
costs - 1,199,885 - 1,199,885
Foreign exchange movements
to non-current assets - (3,615,924) - (3,615,924)
Reportable segment assets 16,838,859 41,232,744 6,104,872 64,176,475
Reportable segment liabilities 12,771,656 242,123 23,273,090 36,286,869
2020 UK Brazil Netherlands Total
3 months 3 months 3 months 3 months
ended ended ended ended
31 March 31 March 31 March 31 March
2020 2020 2020 2020
GBP GBP GBP GBP
-------------------------------- ----------- -------------- -------------- --------------
Administrative expenses (438,462) (164,394) (71,602) (674,458)
Profit/(Loss) on foreign
exchange 1,000,147 (58,701) - 941,446
Loss from operations
per reportable segment 561,685 (223,095) (71,602) 266,988
Net finance costs (308,510) - - (308,510)
Loss before taxation 253,175 (223,095) (71,602) (41,522)
Depreciation charges - - - -
Additions to non-current
assets - 157,149 - 157,149
Capitalisation of borrowing
costs - 987,246 - 987,246
Foreign exchange movements
to non-current assets - (4,819,930) - (4,819,930)
Reportable segment assets 16,907,810 35,798,238 2,433,533 55,139,581
Reportable segment liabilities 7,003,892 432,197 22,607,829 30,043,918
5 Finance income and costs
3 months 3 months
ended ended
31 March 31 March
2021 2020
GBP GBP
--------------------------------------------------- ------------ ------------
Finance income
- Interest income on cash and short-term
deposits 28,320 45,245
Finance costs
- Contingent consideration: unwinding of
discount (99,710) (106,254)
- Contingent consideration: Fair value adjustment 69,895 (483,010)
- Amortisation of Royalty Finance (785,133) (792,622)
- Royalty finance carrying value adjustment (428,514) 40,885
Total finance costs pre-capitalisation (1,215,142) (1,295,756)
--------------------------------------------------- ------------ ------------
Finance costs capitalised to the Araguaia
mine development project 1,199,885 987,246
Net finance costs (15,257) (308,510)
=================================================== ============ ============
6 Intangible assets
Intangible assets comprise exploration and evaluation costs and goodwill. Exploration and evaluation costs comprise internally generated and acquired assets.
Exploration
and
Goodwill Exploration evaluation Total
licences costs
GBP GBP GBP GBP
------------------------- --------- ------------ ------------ ----------
Cost
At 1 January 2020 210,585 5,157,366 1,689,495 7,057,446
Transfers to PPE - - - -
Additions - - - -
Exchange rate movements (52,337) (151,785) (632,452) (836,574)
Net book amount at
31 December 2020 158,248 5,005,581 1,057,043 6,220,872
------------------------- --------- ------------ ------------ ----------
Additions - 17,707 8,592 26,299
Exchange rate movements (15,265) (499,137) (89,372) (603,774)
Net book amount at
31 March 2021 142,983 4,524,151 976,263 5,643,397
========================= ========= ============ ============ ==========
Impairment assessments for exploration and evaluation assets are carried out either on a project-by-project basis or by geographical area.
7 Property, plant and equipment
Mine Development Vehicles Office Land acquisition Total
Property and other equipment
field equipment
GBP GBP GBP GBP GBP
-------------------------- ----------------- ----------------- ----------- ----------------- ------------
Cost
At 1 January 2020 32,260,061 106,722 14,424 - 32,381,207
Additions 4,008,719 1,234 55,989 87,257 4,153,199
Disposals - (5,806) - - (5,806)
Capitalised interest 2,100,521 - - - 2,100,521
Exchange rate movements (7,662,503) (25,162) (13,052) - (7,700,717)
At 31 December 2020 30,706,798 76,988 57,361 87,257 30,928,404
-------------------------- ----------------- ----------------- ----------- ----------------- ------------
Additions 939,993 - 773 154,003 1,094,769
Capitalised interest 1,199,885 - - - 1,199,885
Exchange rate movements (2,996,468) (7,319) (5,572) (11,245) (3,020,604)
-------------------------- ----------------- ----------------- ----------- ----------------- ------------
At 31 March 2021 29,850,208 69,669 52,562 230,015 30,202,454
-------------------------- ----------------- ----------------- ----------- ----------------- ------------
Accumulated depreciation
At 1 January 2020 - 106,239 14,424 - 120,663
Charge for the year - 6,121 25,275 - 31,396
Disposals - (38,244) - - (38,244)
Exchange rate movements - (16,959) (8,399) - (25,358)
-------------------------- ----------------- ----------------- ----------- ----------------- ------------
At 31 December 2020 - 57,157 31,300 - 88,457
-------------------------- ----------------- ----------------- ----------- ----------------- ------------
Charge for the year - 1,337 1,541 - 2,878
Exchange rate movements - (5,537) (2,897) - (8,434)
-------------------------- ----------------- ----------------- ----------- ----------------- ------------
At 31 March 2021 - 52,957 29,944 - 82,901
-------------------------- ----------------- ----------------- ----------- ----------------- ------------
Net book amount as at
31 March 2021 29,850,208 16,712 22,618 230,015 30,119,553
-------------------------- ----------------- ----------------- ----------- ----------------- ------------
Net book amount as at
31 December 2020 30,706,798 19,831 26,061 87,257 30,839,947
-------------------------- ----------------- ----------------- ----------- ----------------- ------------
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 for the 2020 audited financial statements 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. Since then, no impairment indicators have been identified.
8 Share Capital and Share Premium
Issued and fully Ordinary
paid Number of shares Share premium Total
shares GBP GBP GBP
------------------- -------------- ----------- -------------- -----------
At 1 January 2021 1,449,377,287 14,493,773 41,848,306 56,342,079
Issue of equity 162,718,353 1,627,184 9,910,811 11,537,995
At 31 March 2021 1,612,095,640 16,120,957 51,759,117 67,880,074
------------------- -------------- ----------- -------------- -----------
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 GBP12,203,876 and issue costs amounted to GBP665,881.
9 Contingent Consideration
Contingent Consideration payable to Xstrata Brasil Mineração Ltda.
The contingent consideration payable to Xstrata Brasil Mineração Ltda for the acquisition of the Araguaia project has a carrying value of GBP2,908,434 at 31 March 2021 (31 December 2020: GBP2,893,877). It comprises US$5,000,000 consideration in cash as at the date of first commercial production from any of the resource areas within the Enlarged Project area. The key assumptions underlying the treatment of the contingent consideration of US$5,000,000 is a discount factor of 7.0% along with the estimated date of first commercial production.
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 have been capitalised to the mine development asset. The borrowing costs capitalised for the 3 month per 31 March 2021 is GBP48,683 (31 March 2020: GBP50,625).
The change in the fair value of contingent consideration payable to Xstrata Brasil Mineração Ltda generated a gain of GBP34,127 for the three months ended 31 March 2021 (31 March 2020: GBP230,130 loss) due to changes in the exchange rate of the functional currency in which the liability is payable.
Contingent Consideration payable to Vale Metais Basicos S.A.
The contingent consideration payable to Vale Metais Basicos S.A. for the acquisition of the Vermelho project has a carrying value of GBP3,048,406 at 31 March 2021 (31 December 2020: GBP3,033,148). 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.
As at 31 March 2021, there was a finance expense of GBP51,026 (31 March 2020: GBP55,630) recognised in finance costs within the Statement of Comprehensive Income in respect of this contingent consideration arrangement, as the discount applied to the contingent consideration at the date of acquisition was unwound. The finance costs in respect of this contingent consideration are expensed as the Vermelho project has not entered the construction phase.
The change in the fair value of contingent consideration payable to Vale Metais Basicos S.A. generated a gain of GBP35,769 for the three months ended 31 March 2021 (31 March 2020: GBP252,880 loss) due to changes in the value of the functional currency in which the liability is payable (USD).
Xstrata Brasil Vale Metais Total
Mineração Basicos S.A.
Ltda (in (in respect
respect of of Vermelho
Araguaia project)
project)
GBP GBP GBP
------------------------------ --------------------- -------------- ----------
At 1 January 2020 2,975,935 3,270,134 6,246,069
Unwinding of discount 213,285 231,780 445,065
Change in carrying value and
foreign exchange (295,343) (468,766) (764,109)
At 31 December 2020 2,893,877 3,033,148 5,927,025
------------------------------- --------------------- -------------- ----------
Unwinding of discount 48,684 51,026 99,710
Change in carrying value and
foreign exchange (34,127) (35,768) (69,895)
At 31 March 2021 2,908,434 3,048,406 5,956,840
------------------------------- --------------------- -------------- ----------
10 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 the current period end the rate has been estimated to be 2.65%. The royalty is paid over the first 426k tonnes of nickel produced from the Araguaia Ferronickel project. The royalty is linked to production and therefore does not become payable until the project is constructed and commences commercial production, more detail is contained within the audited financial statements for the year ended 31 December 2020.
The Royalty liability has initially been recognised using the amortised cost basis with an 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.
Royalty valuation
GBP
-------------------------------- ------------------
Net book amount at 1 January
2020 20,570,411
Unwinding of discount 3,244,873
Change in carrying value (910,834)
Effects of foreign exchange (851,109)
----------------------------------- ------------------
Net book amount at 31 December
2020 22,053,341
----------------------------------- ------------------
Unwinding of discount 785,133
Change in carrying value 641,456
Effects of foreign exchange (212,941)
----------------------------------- ------------------
Net book amount at 31 March
2021 23,266,989
----------------------------------- ------------------
The carrying value of the royalty reflects assumptions on expected long term nickel price, update headline royalty rate as well as the timing of payments related to expected date of commencement of production and hence payment to be made under the royalty agreement.
Management have sensitised the carrying value of the royalty liability by a change in the royalty rate of 0.1% and it would be GBP878,000 higher/lower and for a $1,000/t Ni increase/decrease in future nickel price the carrying value would change by GBP1,444,614.
10 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:
o 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;
o 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
o 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 ($16,191/t Ni), the start date of commercial production (2024), the prevailing royalty rate (2.65%), the inflation rate (1.5%) and volatility of nickel prices (22.6%).
GBP
----------------------------- ---------
Value as at 1 January 2020 2,246,809
Change in fair value (424,500)
Effects of foreign exchange (65,756)
------------------------------ ---------
Value as at 31 December 2020 1,756,553
------------------------------ ---------
Change in fair value -
Effects of foreign exchange (16,918)
------------------------------ ---------
Value as at 31 March 2021 1,739,635
------------------------------ ---------
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 $1,190,000 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.
11 Special warrant liability
On 9 March 2021 the Company completed the bought deal private placement of special warrants (the "Special Warrants), raising gross proceeds of GBP6.7 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.
The Company has 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 has not been received on or before 18 April 2021, each Special Warrant shall thereafter entitle 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").
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 have been 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 GBP6,178,222 . As at 31 March 2021, the Special Warrants were fair valued at the closing price of the underlying security (the Company's ordinary shares) and determined to be GBP6,481,223. The change in fair value of GBP303,001 (unrealized loss) was recorded as a change in the fair value of derivative financial instruments in the consolidated statements of income and comprehensive income.
Subsequent to quarter end, 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 GBP7,353,018. The change in fair value from 31 March 2021 to 14 April 2021 was determined to be $871,795 unrealised loss. Cumulatively, from the date of issuance on 9 March 2021 to the date of exercise on 14 April 2021, a net loss of $1,174,796 was recognized related to Special Warrants.
GBP
-------------------------------------------- ---------
Gross proceeds from issue of share warrants 6,675,836
Issue costs (497,614)
Value as at initial recognition 6,178,222
Effects of change in fair value 303,001
--------------------------------------------- ---------
Value as at 31 March 2021 6,481,223
--------------------------------------------- ---------
12 Fair value
Carrying Amount versus Fair Value
The following table compares the carrying amounts versus the fair values of the group's financial assets and financial liabilities as at 31 March 2021.
The group considers that the carrying amount of the following financial assets and financial liabilities are
a reasonable approximation of their fair value:
-- Trade receivables
-- Trade payables
-- Cash and cash equivalents
As at 31 March 2021 As at 31 December 2020
Carrying Carrying
amount Fair Value amount Fair Value
-------------------------- ----------- ----------- ------------ -----------
GBP GBP GBP GBP
Financial Assets
Derivative financial
assets 1,739,635 1,739,635 1,756,553 1,756,553
-------------------------- ----------- ----------- ------------ -----------
Total Assets 1,739,635 1,739,635 1,756,553 1,756,553
-------------------------- ----------- ----------- ------------ -----------
Financial Liabilities
Contingent consideration 5,956,840 5,956,840 5,927,025 5,927,025
Royalty Finance 23,266,989 23,266,989 22,053,341 22,053,341
Special warrant
liability 6,481,223 6,481,223 - -
-------------------------- ----------- ----------- ------------ -----------
Total Liabilities 35,705,052 35,705,052 27,980,366 27,980,366
-------------------------- ----------- ----------- ------------ -----------
Fair value Hierarchy
The level in the fair value hierarchy within which the financial asset or financial liability is categorised is
determined on the basis of the lowest level input that is significant to the fair value measurement.
Financial assets and financial liabilities are classified in their entirety into only one of the three levels.
The fair value hierarchy has the following levels:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2- inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly, (i.e., as prices) or indirectly (i.e., derived from prices)
Level 3- inputs for the asset or liability that are not based on observable market data (unobservable inputs)
The derivative financial asset and special warrant liability have been deemed to be a level three fair value. Information related to the valuation method and sensitivities analysis for the derivative financial asset are included in note 10 b and in note 11 for special warrant liability.
13 Dividends
No dividend has been declared or paid by the Company during the three months ended 31 March 2021 (2020: nil).
14 Earnings per share
The calculation of the basic loss per share of 0.063 pence for the three months ended 31 March 2021 (30 March 2020 loss per share: 0.003 pence) is based on the loss attributable to the equity holders of the Company of GBP954,476 for the three-month period ended 31 March 2021 (31 March 2020: GBP41,522 loss)) divided by the weighted average number of shares in issue during the period of 1,515,537,496 (weighted average number of shares for the three months ended 31 March 2020: 1,449,377,287).
Details of share options that could potentially dilute earnings per share in future periods are disclosed in the notes to the Group's Annual Report and Financial Statements for the year ended 31 December 2020 and in note 15 below.
15 Issue of Share Options
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 not the Group has any legal or constructive obligation to settle or repurchase the options in cash.
There was no movement in share options during the three months ended 31 March 2021.
Weighted average
Number of options exercise price
GBP
-------------------------- ------------------ -----------------
Outstanding at 1 January
2021 125,350,000 0.051
Outstanding at 31 March
2021 125,350,000 0.051
-------------------------- ------------------ -----------------
Exercisable at 31 March
2021 125,350,000 0.051
-------------------------- ------------------ -----------------
16 Ultimate controlling party
The Directors believe there to be no ultimate controlling party.
17 Related party transactions
The nature of related party transactions of the Group has not changed from those described in the Group's Annual Report and Financial Statements for the year ended 31 December 2020. There were no significant related party transactions during the 3 month period ended 31 March 2021.
18 Commitments
The Company has conditional capital commitments totaling GBP7.3 million relating to certain items of plant and equipment. These commitments remain subject to a number of conditions precedent which have not been met at the date of this report.
19 Events after the reporting period
On 14 April 2021 the group filed and obtained a receipt for a final short form prospectus dated 9 April 2021 in connection with the placement of 88,060,100 special warrants at a price of 7.5 pence per warrant undertaken on 9 March 2021. Following the publication of this prospectus the warrants automatically converted into 88,060,100 shares at a price of 7.5 pence per share.
20 Approval of interim financial statements
These Condensed Consolidated Interim Financial Statements have been approved for issue by the Board of Directors on 14 May 2021.
For further information, visit www.horizonteminerals.com or contact:
Horizonte Minerals plc info@horizonteminerals.com Jeremy Martin (CEO) +44 (0) 203 356 2901 Anna Legge (Corporate Communications) Peel Hunt (NOMAD & Joint Broker) Ross Allister David McKeown +44 (0)20 7418 8900 BMO (Joint Broker) Thomas Rider Pascal Lussier Duquette Andrew Cameron +44 (0) 20 7236 1010
About Horizonte Minerals:
Horizonte Minerals plc is an AIM and TSX-listed nickel development company focused in Brazil. The Company is developing the Araguaia project, as the next major ferronickel mine in Brazil, and the Vermelho nickel-cobalt project, with the aim of being able to supply nickel and cobalt to the EV battery market. Both projects are 100% owned.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
Except for statements of historical fact relating to the Company, certain information contained in this press release constitutes "forward-looking information" under Canadian securities legislation. Forward-looking information includes, but is not limited to, the ability of the Company to complete the Acquisition as described herein, statements with respect to the potential of the Company's current or future property mineral projects; the success of exploration and mining activities; cost and timing of future exploration, production and development; the estimation of mineral resources and reserves and the ability of the Company to achieve its goals in respect of growing its mineral resources; the ability of the Company to complete the Placing as described herein, and the realization of mineral resource and reserve estimates. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made, and are inherently subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to risks related to: the inability of the Company to complete the Acquisition as described herein, exploration and mining risks, competition from competitors with greater capital; the Company's lack of experience with respect to development-stage mining operations; fluctuations in metal prices; uninsured risks; environmental and other regulatory requirements; exploration, mining and other licences; the Company's future payment obligations; potential disputes with respect to the Company's title to, and the area of, its mining concessions; the Company's dependence on its ability to obtain sufficient financing in the future; the Company's dependence on its relationships with third parties; the Company's joint ventures; the potential of currency fluctuations and political or economic instability in countries in which the Company operates; currency exchange fluctuations; the Company's ability to manage its growth effectively; the trading market for the ordinary shares of the Company; uncertainty with respect to the Company's plans to continue to develop its operations and new projects; the Company's dependence on key personnel; possible conflicts of interest of directors and officers of the Company, the inability of the Company to complete the Placing on the terms as described herein, and various risks associated with the legal and regulatory framework within which the Company operates. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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END
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