Horizonte Minerals Plc
(“Horizonte” or the “Company”)
QUARTERLY FINANCIAL RESULTS FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2022
Horizonte Minerals Plc (AIM: HZM, TSX: HZM), the nickel company developing two Tier 1 assets in Brazil, announces it has today published its unaudited financial results for the three months to 30 September 2022 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 available on SEDAR at www.sedar.com.
Horizonte Minerals plc |
+44 (0) 203 356 2901 |
Peel Hunt LLP (Nominated Adviser & Joint Broker) |
+44 (0)20 7418 8900 |
BMO (Joint Broker) |
+44 (0) 20 7236 1010 |
Tavistock (Financial PR) |
+44 (0) 20 7920 3150 |
ABOUT HORIZONTE MINERALS
Horizonte Minerals plc (AIM & TSX: HZM) is developing two 100%-owned, Tier 1 projects in Parà state, Brazil – the Araguaia Nickel Project and the Vermelho Nickel-Cobalt Project. Both projects are large scale, high-grade, low-cost, low-carbon and scalable. Araguaia will produce 29,000 tonnes of nickel per year to supply the stainless steel market. Vermelho is at feasibility study stage and will produce 25,000 tonnes of nickel and 1,250 tonnes of cobalt to supply the EV battery market. Horizonte’s combined near-term production profile of over 60,000 tonnes of nickel per year positions the Company as a globally significant nickel producer. Horizonte is developing a new nickel district in Brazil that will benefit from established infrastructure, including hydroelectric power available in the Carajás Mining District.
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 of equipment as described herein, statements with respect to the potential of the Company's current or future property mineral projects; the ability of the Company to complete a positive feasibility study regarding the second RKEF line at Araguaia on time, or at all, the success of exploration and mining activities; cost and timing of future exploration, production and development; the costs and timing for delivery of the equipment to be purchased as described herein, 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 realization of mineral resource and reserve estimates and achieving production in accordance with the Company’s potential production profile or at all. 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 of equipment contemplated herein, on time or at all, the ability of the Company to complete a positive feasibility study regarding the implementation of a second RKEF line at Araguaia on the timeline contemplated or at all, 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, and various risks associated with the legal and regulatory framework within which the Company operates, together with the risks identified and disclosed in the Company’s disclosure record available on the Company’s profile on SEDAR at www.sedar.com, including without limitation, the annual information form of the Company for the year ended December 31, 2021, the Araguaia Report and the Vermelho Report. 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.
Horizonte Minerals Plc
|
|
9 months ended 30 September |
3 months ended 30 September |
||
|
|
2022 |
2021 Restated (Note 2.1) |
2022 |
2021 Restated (Note 2.1) |
|
|
Unaudited |
Unaudited |
Unaudited |
Unaudited |
|
Notes |
US$ |
US$ |
US$ |
US$ |
|
|
|
|
|
|
Administrative expenses |
|
(9,504,757) |
(5,593,102) |
(2,841,133) |
(1,921,621) |
Share based payments expense |
17 |
(508,529) |
- |
(508,529) |
- |
Change in fair value of special warrant liability |
|
- |
(1,616,120) |
- |
- |
Change in fair value of derivatives |
11 |
4,360,500 |
- |
- |
- |
Gain/(loss) on foreign exchange |
|
8,586,024 |
483,286 |
(797,045) |
(1,721,587) |
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) before interest and tax |
|
2,933,238 |
(6,725,936) |
(4,146,707) |
(3,643,208) |
|
|
|
|
|
|
Net finance (costs)/income |
5 |
(5,665,339) |
(214,689) |
(2,433,333) |
(73,566) |
|
|
|
|
|
|
(Loss)/Profit before taxation |
|
(2,732,101) |
(6,940,625) |
(6,580,040) |
(3,716,774) |
|
|
|
|
|
|
Taxation |
|
- |
- |
- |
- |
|
|
|
|
|
|
(Loss)/Profit for the year |
|
(2,732,101) |
(6,940,625) |
(6,580,040) |
(3,716,774) |
|
|
|
|
|
|
Other comprehensive income Items that may be reclassified subsequently to profit or loss |
|
|
|
|
|
Cash flow hedges – foreign forward contracts |
13 |
(7,845,763) |
- |
(3,208,230) |
- |
Currency translation differences on translating foreign operations |
|
(17,549,770) |
(2,685,045) |
(7,760,495) |
(4,754,646) |
Other comprehensive income for the period, net of tax |
|
(25,395,533) |
(2,685,045) |
(10,968,725) |
(4,754,646) |
Total comprehensive income for the period |
|
(28,127,634) |
(9,625,670) |
(17,548,765) |
(8,471,420) |
attributable to equity holders of the Company |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to the equity holders of the Group |
|
|
|
|
|
|
|
|
|
|
|
Basic & Diluted earnings per share (pence per share) |
16 |
(1.435) |
(8.488) |
(3.455) |
(4.372) |
|
|
|
|
|
|
|
|
|
|
|
|
Restated Condensed Consolidated Statement of Financial Position
|
|
30 September 2022 |
31 December 2021 Restated (Note 2.1) |
|
|
Unaudited |
Audited |
|
Notes |
US$ |
US$ |
Assets |
|
|
|
Non-current assets |
|
|
|
6 |
9,997,895 |
8,309,485 |
|
Property, plant & equipment |
7 |
218,583,242 |
70,594,090 |
Right of use assets |
|
689,720 |
380,482 |
|
|
229,270,857 |
79,284,057 |
Current assets |
|
|
|
Trade and other receivables |
|
30,551,781 |
13,796,628 |
Derivative financial asset |
10 b |
9,540,000 |
4,950,000 |
Cash and cash equivalents |
|
131,203,868 |
210,492,280 |
|
|
171,295,649 |
229,238,908 |
Total assets |
|
400,566,506 |
308,522,965 |
Equity and liabilities |
|
|
|
Equity attributable to owners of the parent |
|
|
|
Issued capital |
8 |
52,305,376 |
52,215,236 |
Share premium |
8 |
245,672,686 |
245,388,102 |
Other reserves |
|
(48,668,257) |
(23,272,724) |
Accumulated losses |
|
(47,109,682) |
(45,077,646) |
Total equity |
|
202,200,123 |
229,252,968 |
Liabilities |
|
|
|
Non-current liabilities |
|
|
|
Contingent consideration |
9 |
6,779,135 |
6,734,132 |
Royalty Finance |
10 a |
88,600,396 |
44,496,504 |
Deferred consideration |
9 |
4,727,125 |
4,526,425 |
Convertible loan notes liability |
11 |
59,056,362 |
- |
Environmental rehabilitation provision |
12 |
98,036 |
- |
Lease liabilities |
|
587,863 |
321,717 |
Derivative financial liabilities |
13 |
644,098 |
- |
Trade payables |
|
694,292 |
608,976 |
|
|
161,187,307 |
56,687,754 |
Current liabilities |
|
|
|
Trade and other payables |
|
28,905,680 |
21,574,365 |
Deferred consideration |
9 |
950,000 |
949,113 |
Lease liabilities |
|
121,732 |
58,765 |
Derivative financial liabilities |
13 |
7,201,664 |
- |
|
|
37,179,076 |
22,582,243 |
Total liabilities |
|
198,366,383 |
79,269,997 |
Total equity and liabilities |
|
400,566,506 |
308,522,965 |
|
|
|
|
|
Attributable to the owners of the parent |
||||
|
Share capital US$ |
Share premium US$ |
Accumulated losses US$ |
Other reserves US$ |
Total US$ |
|
|
|
|
|
|
As at 1 January 2021 Restated (Note 2.1) |
20,666,053 |
65,355,677 |
(33,304,178) |
(23,519,096) |
29,198,456 |
Comprehensive income |
|
|
|
|
|
Loss for the period |
- |
- |
(6,940,625) |
- |
(6,940,625) |
Other comprehensive income |
|
|
|
|
|
Currency translation differences |
- |
- |
- |
(2,685,045) |
(2,685,045) |
Total comprehensive income |
- |
- |
(6,940,625) |
(2,685,045) |
(9,625,670) |
Transactions with owners |
|
|
|
|
|
Issue of ordinary shares |
2,281,637 |
14,830,639 |
- |
- |
17,112,276 |
Issue costs |
- |
(1,037,822) |
- |
- |
(1,037,822) |
Conversion of special warrants into shares |
1,213,556 |
7,986,413 |
1,616,120 |
- |
10,816,089 |
Issue costs |
- |
(819,935) |
- |
- |
(819,935) |
|
|
|
|
|
|
Total transactions with owners |
3,495,193 |
20,959,295 |
1,616,120 |
- |
26,070,608 |
As at 30 September 2021 Restated (Note 2.1) (unaudited) |
24,161,246 |
86,314,972 |
(38,628,683) |
(26,204,141) |
45,643,394 |
|
Attributable to the owners of the parent |
||||
|
Share capital US$ |
Share premium US$ |
Accumulated losses US$ |
Other reserves US$ |
Total US$ |
|
|
|
|
|
|
As at 1 January 2022 Restated (Note 2.1) |
52,215,236 |
245,388,102 |
(45,077,646) |
(23,272,724) |
229,252,968 |
Comprehensive income |
|
|
|
|
|
Loss for the period |
- |
- |
(2,732,101) |
- |
(2,732,101) |
Other comprehensive income |
|
|
|
|
|
Cash flow hedges – foreign forward contracts |
- |
- |
- |
(7,845,763) |
(7,845,763) |
Currency translation differences |
- |
- |
- |
(17,549,770) |
(17,549,770) |
Total comprehensive income |
- |
- |
(2,732,101) |
(25,395,533) |
(28,127,634) |
Transactions with owners |
|
|
|
|
|
Issue of ordinary shares |
90,140 |
284,584 |
191,536 |
- |
566,260 |
Share based payments |
- |
- |
508,529 |
- |
508,529 |
Total transactions with owners |
90,140 |
284,584 |
700,065 |
- |
1,074,789 |
As at 30 September 2022 (unaudited) |
52,305,376 |
245,672,686 |
(47,109,682) |
(48,668,257) |
202,200,123 |
|
|
9 months ended 30 September |
3 months ended 30 September |
||
|
|
2022 |
2021 Restated (Note 2.1) |
2022 |
2021 Restated (Note 2.1) |
|
|
Unaudited |
Unaudited |
Unaudited |
Unaudited |
|
|
US$ |
US$ |
US$ |
US$ |
Cash flows from operating activities |
|
|
|
|
|
Profit/(Loss) before taxation |
|
(2,732,101) |
(6,940,625) |
(6,580,040) |
(3,716,775) |
Share based payments expense |
17 |
508,529 |
- |
508,529 |
- |
Net finance costs/(income) |
5 |
5,665,339 |
214,689 |
2,433,333 |
73,566 |
Fair value adjustments of derivative assets |
11 |
(4,360,500) |
- |
- |
- |
Change in fair value of special warrant liability |
|
- |
1,616,120 |
- |
- |
Exchange differences |
|
(8,586,024) |
(483,286) |
797,045 |
1,721,587 |
Operating loss before changes in working capital |
|
(9,504,757) |
(5,593,102) |
(2,841,133) |
(1,921,622) |
Decrease/(increase) in trade and other receivables |
|
(13,560,173) |
(453,748) |
(10,502,914) |
(134,965) |
(Decrease)/increase in trade and other payables |
|
7,416,636 |
1,160,587 |
19,257,493 |
(3,299,040) |
Net cash (outflow)/inflow from operating activities |
|
(15,648,294) |
(4,886,263) |
5,913,446 |
(5,355,627) |
Cash flows from investing activities |
|
|
|
|
|
Purchase of intangible assets |
6 |
(1,409,985) |
(248,014) |
(1,192,638) |
(119,694) |
Purchase of property, plant and equipment |
7 |
(131,481,417) |
(9,957,265) |
(64,434,117) |
843,509 |
Interest received |
5 |
4,460,729 |
311,920 |
2,066,435 |
159,974 |
Net cash outflow from investing activities |
|
(128,430,673) |
(9,893,359) |
(63,560,320) |
883,789 |
Cash flows from financing activities |
|
|
|
|
|
Net proceeds from issue of ordinary shares |
8 |
566,260 |
16,074,454 |
29,534 |
- |
Proceeds from issue of convertible loan notes |
11 |
61,262,500 |
- |
- |
- |
Issue costs |
11 |
(2,347,041) |
- |
- |
- |
Proceeds from royalty finance arrangement |
10a |
25,000,000 |
- |
- |
- |
Issue costs |
10a |
(847,939) |
- |
- |
- |
Net proceeds from issue of share warrants |
|
- |
8,448,140 |
- |
- |
Net cash inflow from financing activities |
|
83,633,780 |
24,522,594 |
29,534 |
- |
Net (decrease)/increase in cash and cash equivalents |
|
(60,445,187) |
9,742,972 |
(57,617,340) |
(4,471,838) |
Cash and cash equivalents at beginning of period |
|
210,492,280 |
14,925,021 |
198,956,061 |
30,655,023 |
Exchange gain/(loss) on cash and cash equivalents |
|
(18,843,225) |
(49,047) |
(10,134,853) |
(1,564,239) |
Cash and cash equivalents at end of the period |
|
131,203,868 |
24,618,946 |
131,203,868 |
24,618,946 |
Restated Notes to the Financial Statements
GBP/USD |
31 December 2021 |
30 September 2021 |
Closing rate |
1.3477 |
1.3484 |
Average rate |
1.3774 |
1.3866 |
USD/BRL |
|
|
Closing rate |
5.5710 |
5.4490 |
Average rate |
5.3810 |
5.3181 |
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.
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 and cobalt 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.
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 10b.1) and 10b.2).
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:
3.4 Hedge accounting
The Group has recognised provisions for liabilities of uncertain timing or amount including the environmental rehabilitation provision. The provision is measured at the best estimate of the expenditure required to settle the obligation at the period end date, discounted at a pre-tax rate reflecting current market assessments of the time value of money and risks specific to the liability.
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:
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.
2022 |
UK |
Brazil |
Netherlands |
Total |
|
9 months ended 30 September 2022 US$ |
9 months ended 30 September 2022 US$ |
9 months ended 30 September 2022 US$ |
9 months ended 30 September 2022 US$ |
Administrative expenses |
(7,465,840) |
(1,902,253) |
(136,664) |
(9,504,757) |
Share based payments expense |
(508,529) |
- |
- |
(508,529) |
Change in fair value of derivative |
4,360,500 |
- |
- |
4,360,500 |
Profit/(Loss) on foreign exchange |
8,627,415 |
- |
(41,391) |
8,586,024 |
Profit/(Loss) before interest and tax per reportable segment |
5,013,546 |
(1,902,253) |
(178,055) |
2,933,238 |
Net finance costs |
74,831 |
(201,197) |
(5,538,973) |
(5,665,339) |
Profit/(Loss) before taxation |
5,088,377 |
(2,103,450) |
(5,717,028) |
(2,732,101) |
Depreciation charges |
- |
35,186 |
- |
35,186 |
Additions to non-current assets |
- |
132,891,403 |
- |
132,891,403 |
Capitalisation of borrowing costs |
- |
13,260,561 |
- |
13,260,561 |
Foreign exchange movements to non-current assets |
- |
3,484,915 |
- |
3,484,915 |
Reportable segment assets |
105,005,050 |
285,664,136 |
9,897,320 |
400,566,506 |
Reportable segment liabilities |
72,910,728 |
36,846,304 |
88,609,350 |
198,366,382 |
|
|
|
|
|
2021 |
UK |
Brazil |
Netherlands |
Total |
|
9 months ended 30 September 2021 US$ |
9 months ended 30 September 2021 US$ |
9 months ended 30 September 2021 US$ |
9 months ended 30 September 2021 US$ |
Administrative expenses |
(4,946,681) |
(553,789) |
(92,632) |
(5,593,102) |
Change in fair value of special warrant liability |
(1,616,120) |
- |
- |
(1,616,120) |
Profit/(Loss) on foreign exchange |
(58,992) |
- |
542,278 |
483,286 |
Loss before interest and tax per reportable segment |
(6,621,793) |
(553,789) |
449,646 |
(6,725,936) |
Net finance costs |
(214,689) |
- |
- |
(214,689) |
Loss before taxation |
(6,836,482) |
(553,789) |
449,646 |
(6,940,625) |
Depreciation charges |
- |
13,646 |
- |
13,646 |
Additions to non-current assets |
- |
14,442,749 |
- |
14,442,749 |
Capitalisation of borrowing costs |
- |
7,486,579 |
- |
7,486,579 |
Foreign exchange movements to non-current assets |
- |
(1,606,193) |
- |
(1,606,193) |
Reportable segment assets |
13,327,460 |
82,190,208 |
2,603,805 |
98,121,473 |
Reportable segment liabilities |
9,935,239 |
4,806,571 |
37,736,269 |
52,478,079 |
|
|
|
|
|
2022 |
UK |
Brazil |
Netherlands |
Total |
|
3 months ended 30 September 2022 US$ |
3 months ended 30 September 2022 US$ |
3 months ended 30 September 2022 US$ |
3 months ended 30 September 2022 US$ |
Administrative expenses |
(2,185,371) |
(613,198) |
(42,564) |
(2,841,133) |
Share based payments expense |
(508,529) |
- |
- |
(508,529) |
Change in fair value of derivative |
- |
- |
- |
- |
Profit/(Loss) on foreign exchange |
554,012 |
(335,535) |
(1,015,522) |
(797,045) |
Profit/(Loss) before interest and tax per reportable segment |
(2,139,888) |
(948,733) |
(1,058,086) |
(4,146,707) |
Net finance costs |
(73,566) |
66,130 |
(2,425,897) |
(2,433,333) |
Profit/(Loss) before taxation |
(2,213,454) |
(882,603) |
(3,483,983) |
(6,580,040) |
Depreciation charges |
- |
13,009 |
- |
13,009 |
Additions to non-current assets |
- |
60,720,658 |
- |
60,720,658 |
Capitalisation of borrowing costs |
- |
4,840,344 |
- |
4,840,344 |
Foreign exchange movements to non-current assets |
- |
(1,898,279) |
- |
(1,898,279) |
2021 |
UK |
Brazil |
Netherlands |
Total |
|
3 months ended 30 September 2021 US$ |
3 months ended 30 September 2021 US$ |
3 months ended 30 September 2021 US$ |
3 months ended 30 September 2021 US$ |
Administrative expenses |
(1,635,123) |
(243,862) |
(42,636) |
(1,921,621) |
Change in fair value of special warrant liability |
- |
- |
- |
- |
Profit/(Loss) on foreign exchange |
(467,189) |
- |
(1,254,398) |
(1,721,587) |
Loss before interest and tax per reportable segment |
(2,102,312) |
(243,862) |
(1,297,034) |
(3,643,208) |
Net finance costs |
(73,566) |
- |
- |
(73,566) |
Loss before taxation |
(2,175,878) |
(243,862) |
(1,297,034) |
(3,716,774) |
Depreciation charges |
- |
5,355 |
- |
5,355 |
Additions to non-current assets |
- |
3,657,467 |
- |
3,657,467 |
Capitalisation of borrowing costs |
- |
3,114,898 |
- |
3,114,898 |
Foreign exchange movements to non-current assets |
- |
(3,750,293) |
- |
(3,750,293) |
|
9 months ended 30 September 2022 |
9 months ended 30 September 2021 |
3 months ended 30 September 2022 |
3 months ended 30 September 2021 |
|
US$ |
US$ |
US$ |
US$ |
Finance income |
|
|
|
|
– Interest income on cash and short-term deposits |
4,460,729 |
311,920 |
2,066,435 |
159,974 |
Finance costs |
|
|
|
|
– Interest on land purchases |
(169,382) |
- |
78,156 |
- |
– Interest on lease liability |
(38,410) |
- |
(13,945) |
- |
– Commitment fees on senior debt |
(3,794,151) |
- |
(1,527,649) |
- |
– Other |
(8,960) |
- |
(5,114) |
- |
– Contingent and deferred consideration: unwinding of discount |
(577,665) |
(419,519) |
(120,110) |
(143,755) |
– Contingent and deferred consideration: Fair value adjustment |
31,677 |
- |
(74,449) |
- |
– Contingent and deferred consideration: change in estimate |
299,399 |
- |
- |
- |
– Convertible loan note: unwinding of discount |
(3,767,306) |
- |
(1,914,701) |
- |
– Amortisation of Royalty Finance |
(6,608,422) |
(3,405,152) |
(2,740,264) |
(1,188,256) |
– Royalty finance carrying value adjustment |
(8,753,409) |
(4,188,517) |
(3,022,036) |
(2,016,427) |
Total finance costs pre-capitalisation |
(18,925,900) |
(7,701,268) |
(7,273,677) |
(3,188,464) |
Finance costs capitalised to the Araguaia mine development project |
13,260,561 |
7,486,579 |
4,840,344 |
3,114,898 |
Net finance costs |
(5,665,339) |
(214,689) |
(2,433,333) |
(73,566) |
|
|
|
Exploration and |
|
|
|
Goodwill |
Exploration licences |
evaluation costs |
Software |
Total |
|
US$ |
US$ |
US$ |
US$ |
US$ |
Cost |
|
|
|
|
|
At 1 January 2021 |
215,979 |
6,831,692 |
1,442,670 |
- |
8,490,341 |
Additions |
- |
103,461 |
209,246 |
92,515 |
405,222 |
Amortisation for the year |
- |
- |
- |
(2,509) |
(2,509) |
Exchange rate movements |
(14,844) |
(480,024) |
(88,701) |
- |
(583,569) |
Net book amount at 31 December 2021 |
201,135 |
6,455,129 |
1,563,215 |
90,006 |
8,309,485 |
Additions |
- |
223,768 |
1,095,394 |
90,823 |
1,409,985 |
Amortisation for the year |
- |
- |
- |
(20,431) |
(20,431) |
Exchange rate movements |
7,234 |
270,232 |
18,154 |
3,237 |
298,856 |
Net book amount at 30 September 2022 |
208,369 |
6,949,129 |
2,676,762 |
163,635 |
9,997,895 |
Impairment assessments for exploration and evaluation assets are carried out either on a project-by-project basis or by geographical area.
Issued and fully paid |
Number of shares (before share consolidation) |
Number of shares (after share consolidation) |
Ordinary shares US$ |
Share premium US$ |
Total US$ |
At 1 January 2022 Restated |
3,802,365,590 |
190,118,279 |
52,215,236 |
245,388,102 |
297,603,338 |
Issue of equity |
7,000,000 |
350,000 |
90,140 |
284,584 |
374,724 |
At 30 September 2022 |
3,809,365,590 |
190,468,279 |
52,305,376 |
245,672,686 |
297,978,062 |
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 US$2,428,446 at 30 September 2022 (31 December 2021: US$2,308,612). It comprises US$5,000,000 consideration in cash as at the date of first commercial production from the 'Vale dos Sonhos' resource areas within the Enlarged Project area. The key assumptions underlying the treatment of the contingent consideration the US$5,000,000 and 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 nine months to 30 September 2022 is US$119,834 (30 September 2021: US$204,831).
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 US$4,350,690 at 30 September 2022 (31 December 2021: US$4,425,522). 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 30 September 2022, there was a net finance income of US$74,831 (30 September 2021: US$214,689) 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 net finance income includes a change in estimate due to the change in the estimated date of first commercial production from 30 June 2026 to 30 June 2027. The finance costs in respect of this contingent consideration are expensed as the Vermelho project has not entered the construction phase.
Deferred Consideration payable to Companhia Brasileira de Alumínio
The key assumptions underlying the treatment of the deferred consideration is a discount factor of 7.0% and the estimated timing of the milestones as outlined previously.
As at 30 September 2022, there was a finance expense of US$201,587 (30 September 2021: $nil) recognised in finance costs within the Statement of Comprehensive Income in respect of this deferred consideration arrangement, as the discount applied to the deferred consideration at the date of acquisition was unwound.
|
|
Companhia Brasileira de Aluminio (in respect of Araguaia project) |
Xstrata Brasil Mineração Ltda (in respect of Araguaia project) |
Vale Metais Basicos S.A. (in respect of Vermelho project) |
Total |
|
|
|
|
|
|
|
|
US$ |
US$ |
US$ |
US$ |
At 1 January 2021 |
|
|
|
|
|
Initial recognition |
|
5,450,087 |
3,946,090 |
4,136,002 |
13,532,179 |
Unwinding of discount |
|
19,256 |
276,226 |
289,520 |
585,002 |
Change in estimate |
|
- |
(1,913,705) |
- |
(1,913,705) |
Change in carrying value and foreign exchange |
|
6,195 |
- |
(1) |
6,194 |
At 31 December 2021 |
|
5,475,538 |
2,308,611 |
4,425,521 |
12,209,670 |
Unwinding of discount |
|
233,264 |
119,834 |
224,567 |
577,665 |
Change in estimate |
|
- |
- |
(299,399) |
(299,399) |
Change in carrying value and foreign exchange |
|
(31,677) |
- |
1 |
(31,676) |
At 30 September 2022 |
|
5,677,125 |
2,428,445 |
4,350,690 |
12,456,260 |
Management have sensitised the carrying value of the royalty liability for a US$1,000/t Ni increase/decrease in future nickel price the carrying value would change by US$3,007,914.
|
|
|
|
|
|
|
Araguaia Royalty valuation |
Vermelho Royalty valuation |
Total |
|
|
US$ |
US$ |
US$ |
Net book amount at 1 January 2021 |
|
30,131,755 |
- |
30,131,755 |
Unwinding of discount |
|
4,637,057 |
- |
4,637,057 |
Change in carrying value |
|
9,727,692 |
- |
9,727,692 |
Effects of foreign exchange |
|
- |
- |
- |
Net book amount at 31 December 2021 |
|
44,496,504 |
- |
44,496,504 |
Initial recognition |
|
- |
25,000,000 |
25,000,000 |
Embedded derivative – initial valuation |
|
- |
4,590,000 |
4,590,000 |
Transaction costs |
|
- |
(847,939) |
(847,939) |
Unwinding of discount |
|
3,929,180 |
2,679,242 |
6,608,422 |
Change in carrying value |
|
5,893,677 |
2,859,732 |
8,753,409 |
Effects of foreign exchange |
|
- |
- |
- |
Net book amount at 30 September 2022 |
|
54,319,361 |
34,281,035 |
88,600,396 |
10 b) Derivative financial assets
10 b.1) Araguaia derivative financial assets
The aforementioned Araguaia royalty agreement includes several options embedded within the agreement as follows:
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 has been fair valued using a Monte Carlo simulation which runs a high number of scenarios in order to derive an estimated valuation. The Monte Carlo simulation was performed at the 31 December 2021 year end. The Monte Carlo simulation is performed annually at the year-end date. The assumptions driving the buy-back option valuation were assessed as at 30 September 2022 and it was concluded that the change in the valuation would not be material.
The assumptions for the valuation of the Buy Back Option (per the Monte Carlo simulation) are the future nickel price (US$16,941/t Ni), the production start date (May 2023), the prevailing royalty rate (2.95%), the inflation rate (1.76%) and volatility of nickel prices (22.1%).
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 US$1,000 would give rise to a US$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.
10 b.2) Vermelho derivative financial assets
After the 4th anniversary, Horizonte has the right to buy back 50% of the royalty on any direct or indirect change of control in respect of Vermelho at a valuation that meets certain minimum economic returns for OMF.
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 has been fair valued using a Monte Carlo simulation which runs a high number of scenarios in order to derive an estimated valuation. The Monte Carlo simulation was performed at the agreement date of 23 November 2021.
The assumptions for the valuation of the Buy Back Option (per the Monte Carlo simulation) are the future nickel price (US$16,602/t Ni), the future cobalt price (US$45,387/t Co), the production profile from 2027 to 2065, the expected royalty rate (2.1%), the inflation rate (1.76%), volatility of nickel prices (22.1%) and volatility of cobalt prices (28.0%).
Sensitivity analysis
The valuation of the Buyback option is sensitive to estimates for nickel and cobalt prices and their respective volatilities, the change in royalty rate and the production profile.
An increase in the volatility of the nickel (28%) and cobalt (35%) would give rise to a US$270,000 increase in the value of the option. An increase in the royalty rate to 2.25% (assuming the original volatilities 22%Ni, 28%Co) would increase the option valuation by US$830,000.
If the production profile decreased by 20% (assuming the original volatilities) the option valuation would decrease by U$1.9million.
The nickel and cobalt price volatilities based on both 5- and 10-year historic prices are in close proximity and this is the period in which management consider that the option would be exercised. Therefore, management have concluded that currently no reasonably possible alternative assumption for this estimate would give rise to a material impact on the valuation.
|
|
Araguaia Royalty |
Vermelho Royalty |
Total |
|
|
US$ |
US$ |
US$ |
Value as at 1 January 2021 |
|
2,400,000 |
- |
2,400,000 |
Change in fair value |
|
2,550,000 |
- |
2,550,000 |
Value as at 31 December 2021 |
|
4,950,000 |
- |
4,950,000 |
Initial recognition |
|
- |
4,590,000 |
4,590,000 |
Value as at 30 September 2022 |
|
4,950,000 |
4,590,000 |
9,540,000 |
|
|
|
|
|
The convertible loan notes are unsecured and the noteholders will be repaid as follows:
The initial recognition of the embedded derivative conversion feature has been recognised as a liability on the balance sheet with any changes to the fair value of the derivative recognised in the income statement. It has been fair valued using a Monte Carlo simulation which runs a high number of scenarios in order to derive an estimated valuation. The Monte Carlo simulation was performed at the transaction date 29 March 2022 and 30 June 2022.
The assumptions for the valuation of the conversion feature (per the Monte Carlo simulation) are the Horizonte Minerals Plc future share price volatility (60%), GBP: USD exchange rate volatility (9%) on the conversion price, risk-free rates (2.41% at 29 March and 2.98% at 30 June).
Sensitivity analysis – Conversion feature derivative
The valuation of the conversion feature derivative is sensitive to the Horizonte Minerals Plc future share price volatility (60%). If the share price volatility increased to 80% the option valuation would increase by $3.5million. If the volatility decreased to 40% the option valuation would decrease by $1.9million.
|
|
Embedded derivative |
Convertible loan notes liability |
Total |
|
|
US$ |
US$ |
US$ |
Initial recognition (after discount on issue) |
|
19,161,400 |
42,101,100 |
61,262,500 |
Transaction costs |
|
- |
(1,612,944) |
(1,612,944) |
Unwinding of discount |
|
- |
3,767,306 |
3,767,306 |
Change in fair value |
|
(4,360,500) |
- |
(4,360,500) |
Value as at 30 September 2022 |
|
14,800,900 |
44,255,462 |
59,056,362 |
|
|
|
|
|
12 Environmental rehabilitation provision
|
|
Total |
|
|
US$ |
Additions |
|
98,036 |
Value as at 30 September 2022 |
|
98,036 |
|
|
|
13 Derivative financial liability
In January 2022 the Group’s Board approved the budget for the development of the Araguaia Ferronickel Project (Project). With the funding base being primarily US Dollars, the Project budget includes a significant portion of spend in local currency, the Brazilian Real (BRL). The Group and its senior lenders agreed to implement a foreign exchange hedging strategy that ensures that at least 70% of its BRL denominated capital expenditure to be incurred between 14 May 2022 and 31 March 2024 is hedged to reduce the exposure of future BRL foreign exchange risk.
The Group has therefore entered into a series of monthly non-deliverable forward transactions (“NDFs”) which will lock in a series of future USD: BRL rates based on the Group’s projected spend profile at the time of entering into those transactions. NDFs by definition are non-deliverable and so the Group would either pay or receive an amount of BRL to ensure that it ultimately achieves the hedged rate.
The following table compares the carrying amounts versus the fair values of the group’s financial assets and financial liabilities as at 30 September 2022.
|
As at 30 September 2022 |
As at 31 December 2021 |
||||
Carrying amount |
Amortised Cost |
Fair Value |
Carrying amount |
Amortised cost |
Fair Value |
|
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
|
Financial Assets Derivative financial assets |
9,540,000 |
- |
9,540,000 |
4,950,000 |
- |
4,950,000 |
Total Assets |
9,540,000 |
|
9,540,000 |
4,950,000 |
|
4,950,000 |
Financial Liabilities |
|
|
|
|
|
|
Contingent consideration |
6,779,135 |
6,779,135 |
- |
6,734,132 |
6,734,132 |
|
Deferred consideration |
5,677,125 |
5,677,125 |
- |
5,475,538 |
5,475,538 |
|
Royalty Finance |
88,600,396 |
88,600,396 |
- |
44,496,504 |
44,496,504 |
|
Convertible Loan Note – host debt liability |
44,255,462 |
44,255,462 |
- |
- |
- |
- |
Convertible Loan Note – embedded derivative |
14,800,900 |
- |
14,800,900 |
- |
- |
- |
Derivative financial liability |
7,845,763 |
- |
7,845,763 |
- |
- |
- |
Total Liabilities |
167,958,780 |
145,312,118 |
22,646,663 |
56,706,174 |
56,706,174 |
- |
The level in the fair value hierarchy within which the financial asset or financial liability is categorised is
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 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 has 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.