Horizonte Minerals Plc: Final Results

LONDON, UNITED KINGDOM–(Marketwired – March 17, 2017) – Horizonte Minerals Plc (AIM:HZM)(TSX:HZM) (‘Horizonte’ or ‘the Company’), the nickel development company focused in Brazil, announces its final results for the year ended 31 December 2016.

Highlights

• Publication of PFS on Araguaia Nickel Project which demonstrated robust economics
• Post tax NPV8 of US$581 million at a nickel price of US$14,000/t and an NPV8 of US$328 million at US$12,000/t Ni
• Post tax IRR of 26.4% at US$14,000/t and 19.3% at US$12,000/t Ni
• High grade ore with average nickel grade of 1.96% for the first 10 years of production
• Project on the lower range of the global cost curve with C1 cash costs of US$3.15/Ib Ni (US$6,948/t Ni)
• £9 million fundraise, including key strategic institutions, completed in December 2016 to finance the Araguaia Feasibility Study (FS) – cash of £9.3 million as at year end
• Strong balance sheet with net assets of £37 million
• Future demand for nickel looks robust with predicted growth running between 2% and 4% this year
• Feasibility Study underway with planned completion end of 2017

Chairman’s Statement

2016 was a significant year for Horizonte which saw us achieve numerous major milestones at our Araguaia Nickel Project in Brazil. These include the delivery of a Pre-Feasibility Study (‘PFS’), the receipt of our Preliminary Environmental Licence, and raising the funds to deliver a Feasibility Study in 2017. We are now focussed on taking this project up the value curve, through the Feasibility Study process and into development as one of the lower cost ferronickel operations in the market, benefitting from its high grade resource and low capital intensity.

Our updated PFS demonstrates that the enlarged Araguaia Project is one of the largest and highest grade undeveloped nickel saprolite resources globally. It will generate US$1.3 billion in free cash flow over the Life of Mine (‘LOM’) considering an estimation of US$12,000/t long term. Having combined Glencore’s adjacent nickel project with our own Araguaia project in a low-cost acquisition which was completed in 2016, the new compelling economics highlight a post-tax NPV of U$328 million and IRR of 19% based on a long-term nickel price of US$12,000/t. Using the bank’s consensus of a mid-term nickel price of US$14,000/t, the NPV increases to US$581 million with an IRR of 26.4% showing the significant gearing that is available with any future increase in nickel prices.

Once developed, Araguaia, is expected to produce around 14,500 tonnes of nickel per year, with a resource that is now a Tier 1 world class asset in terms of size and grade. The value is demonstrated in this updated PFS which now shows an average grade for the first 10 years of mining of 1.96% nickel, and the life of mine grade over 28 years averaging 1.77% nickel. This places the project firmly in the upper quartile of the global grade curve for this type of deposit.

Most significantly the PFS also demonstrates that Araguaia is cash flow positive at today’s nickel prices, which puts the project within a limited group of global assets that are considered viable in the current low nickel price environment. The start of 2016 saw nickel prices at a 13 year low of US$7,750/t, however after base metals rallied in the last quarter of 2016, many banks and analysts raised their 2017 forecasts for nickel. There are multiple reasons for this including the United States of America’s ambitious infrastructure spending plans which are expected to boost global metal demand growth over the coming years, coupled with the closing of multiple nickel mines which will slow market growth and curtail supply.

Morgan Stanley and Credit Suisse both picked nickel as its number one metal for 2016. Wood Mackenzie have cited that the “optimistically resurgent Chinese stainless market” will be the contributing factor to the predicted favourable pricing fundamentals and Macquarie has stated that nickel use in batteries could more than double over the next 10 years. Now is the time to be developing the next generation projects at the low-price range to create maximum value. We are targeting nickel production from Araguaia by 2019 which aligns the project ideally with this predicted increase in nickel price over the mid-term, offering leveraged exposure to one of the world’s next major nickel mines at the optimum time.

Another testament to the quality of Araguaia, is that we successfully raised £9 million in November 2016 from institutions in both the UK and Canada to fund the Feasibility Study. As a result, we were delighted to welcome two new significant institutional investors, JP Morgan and Hargreave Hale, to our already strong shareholder register which also includes Teck, Henderson, City Financial, Richard Griffiths. I believe that the calibre of this group of cornerstone investors is a strong endorsement for a company of our size.

Eager to move forward we appointed a Feasibility Study Manager in January 2017. With a high calibre nickel development team (ex Falconbridge; Xstrata; Anglo American) already in place we believe Wagner Oliveira will be a valuable addition to our team, bringing considerable experience in the nickel arena having worked with Anglo American plc on its Barro Alto ferronickel operation and prior to this at the Codemin ferronickel plant in Brazil. We have already finalised the selection of the engineering groups to undertake the Feasibility Study with a view to delivering the full report by the end of 2017. Having been granted the Preliminary Licence in 2016 which demonstrated the Pará State government’s confidence in the credibility and viability of Araguaia, we have been able to progress the work towards the Installation Licence which we will apply for this year, the receipt of which will permit the construction of the project.

Conclusion

As a team, I am proud that we have taken Araguaia from a grassroots discovery up the development curve to where we stand today, about to embark on a Feasibility Study for one of the largest nickel projects in the world. Despite difficult nickel pricing, 2016 was a year of growth for Horizonte and the year ahead will see us transform into a near-term nickel producer, taking advantage of the forecasted rise in the price of the metal. I would like to take this opportunity to thank the Horizonte Board and Management team for their continued hard work towards the development of your company and I look forward to the year ahead with great confidence.

David J Hall, Chairman

16 March 2017

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HORIZONTE MINERALS PLC

We have audited the financial statements of Horizonte Minerals plc for the year ended 31 December 2016 which comprise the consolidated statements of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statements of changes in equity, the consolidated and company statements of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements

In our opinion the financial statements:

• give a true and fair view of the state of Group and Company’s affairs as at 31 December 2016 and of the Group’s loss for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
• the financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Stuart Barnsdall (senior statutory auditor)

For and on behalf of BDO LLP, statutory auditor

London, UK

Date: 16 March 2017

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

INDEPENDENT AUDITOR’S REPORT IN RESPECT OF CANADIAN NATIONAL INSTRUMENT 52-107 (ACCEPTABLE ACCOUNTING PRINCIPALS AND AUDITING STANDARDS)

To the Shareholders of Horizonte Minerals PLC

We have audited the accompanying financial statements of Horizonte Minerals PLC for the year ended 31 December 2016 which comprise the consolidated statement of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statements of changes in equity, the consolidated and company statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. The financial reporting framework that has been applied in the preparation of the consolidated financial statements is applicable law and International Financial Reporting Standards (IFRSs).

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the applicable financial reporting framework, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian Generally Accepted Auditing Standards (Canadian GAAS). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Horizonte Minerals PLC as at 31 December 2016 and its financial performance and its cash flows for the year then ended in accordance with IFRSs.

Other matters

During the year ended 31 December 2016, the Company changed its auditor and as such the audit of the financial statements for the year ended 31 December 2015 was performed by the Group’s previous auditors, except for the restated amounts and disclosures relating to the prior year adjustment described in note 21 which we have audited.

BDO LLP

London

United Kingdom

16 March 2017

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2016

		Year ended 31 December 2016		Year ended 31 December 2015 (Restated)
	Notes	£		£
Administrative expenses		(1,009,623	)	(864,892	)
Charge for share options granted		(324,890	)	(100,248	)
Changes in fair value of contingent consideration	17	(260,632	)	(26,969	)
Gain/(loss) on foreign exchange		65,241		(251,409	)
Other losses – impairment of available-for-sale assets		–		(253,006	)
Operating loss	6	(1,529,904	)	(1,496,524	)
Finance income	8	4,387		14,918
Finance costs	8	(220,817	)	(63,093	)
Loss before taxation		(1,746,334	)	(1,544,699	)
Income tax	9	–		–
Loss for the year from continuing operations attributable to owners of the parent		(1,746,334	)	(1,544,699	)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Impairment in value of available-for-sale financial assets		–		253,006
Currency translation differences on translating foreign operations	16	9,315,180		(6,354,056	)
Other comprehensive income for the year, net of tax		9,315,180		(6,101,050	)
Total comprehensive income for the year attributable to owners of the parent		7,568,846		(7,654,749	)
Loss per share from continuing operations attributable to owners of the parent
Basic and diluted (pence per share)	19	(0.240	)	(0.290	)

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

Consolidated Statement of Financial Position

Company number: 05676866

As at 31 December 2016

		31 December 2016		31 December 2015 (Restated)		1 January 2015 (Restated)
	Notes	£		£		£
Assets
Non-current assets
Intangible assets	10	32,017,796		20,351,355		21,075,565
Property, plant & equipment		862		11,888		54,390
		32,018,658		20,363,243		21,129,955
Current assets
Trade and other receivables		35,493		40,912		22,709
Cash and cash equivalents	12	9,317,781		2,738,905		5,030,968
		9,353,274		2,779,817		5,053,677
Total assets		41,371,932		23,143,060		26,183,632
Equity and liabilities
Equity attributable to owners of the parent
Share capital	13	11,719,343		6,712,044		4,924,271
Share premium	14	35,767,344		31,252,708		31,095,370
Other reserves	16	4,467,064		(4,848,116	)	1,252,934
Retained losses		(14,899,297	)	(13,477,853	)	(12,033,402	)
Total equity		37,054,454		19,638,783		25,239,173
Liabilities
Non-current liabilities
Contingent consideration	17	3,643,042		3,161,592		335,327
Deferred tax liabilities	9	282,450		193,665		273,238
		3,925,492		3,355,257		608,895
Current liabilities
Trade and other payables	17	391,986		149,020		335,894
		391,986		149,020		335,894
Total liabilities		4,317,478		3,504,277		944,459
Total equity and liabilities		41,371,932		23,143,060		26,183,632

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

The Financial Statements were authorised for issue by the Board of Directors on 16 March 2017 and were signed on its behalf.

David J Hall, Chairman

Jeremy J Martin, Chief Executive Officer

Company Statement of Financial Position

Company number: 05676866

As at 31 December 2016

		31 December 2016		31 December 2015 (Restated)		1 January 2015 (Restated)
	Notes	£		£		£
Assets
Non-current assets
Property, plant & equipment	11	283		1,254		2,291
Investment in subsidiaries	25	43,670,347		40,292,156		33,361,507
		43,670,630		40,293,410		33,363,798
Current assets
Trade and other receivables		35,423		18,739		13,818
Cash and cash equivalents	12	9,143,993		2,568,266		4,208,984
		9,179,416		2,587,005		4,222,802
Total assets		52,850,046		42,880,415		37,586,600
Equity and liabilities
Equity attributable to equity shareholders
Share capital	13	11,719,343		6,712,044		4,924,271
Share premium	14	35,767,344		31,252,708		31,095,370
Merger reserve	16	10,888,760		10,888,760		10,888,760
Retained losses		(9,915,498	)	(9,637,561	)	(10,159,288	)
Total equity		48,459,949		39,215,951		36,749,113
Liabilities
Non-current liabilities
Contingent consideration	17	3,643,042		3,161,591		335,327
		3,643,042		3,161,591		335,327
Current liabilities
Trade and other payables	17	747,055		502,873		502,160
		747,055		502,873		502,160
Total liabilities		4,390,097		3,664,464		837,487
Total equity and liabilities		52,850,046		42,880,415		37,586,600

The above Company Statement of Financial Position should be read in conjunction with the accompanying notes, loss for the period was £602,827 (2015: £421,479 profit).

The Financial Statements were authorised for issue by the Board of Directors on 16 March 2017 and were signed on its behalf.

David J Hall, Chairman

Jeremy J Martin, Chief Executive Officer

Statements of Changes in Equity

For the year ended 31 December 2016

	Attributable to owners of the parent
	Share	Share		Retained		Other
	capital	premium		losses		reserves		Total
Consolidated	£	£		£		£		£
As at 1 January 2015 (previously reported)	4,924,271	31,095,370		(9,526,869	)	(321,601	)	26,171,171
Refer note 22 c	–	–		–		1,574,535		1,574,535
Refer note 22 d	–	–		(2,506,533	)	–		(2,506,533	)
As at 1 January 2015 (Restated)	4,924,271	31,095,370		(12,033,402	)	1,252,934		25,239,173
Loss for the year	–	–		(1,544,699	)	–		(1,544,699	)
Other comprehensive income:
Impairment of available-for-sale financial assets	–	–		–		253,006		253,006
Currency translation differences on translating foreign operations	–	–		–		(6,354,056	)	(6,354,056	)
Total comprehensive income for the year	–	–		(1,544,699	)	(6,101,050	)	(7,654,749	)
Issue of ordinary shares	1,787,773	200,300		–		–		1,988,073
Issue costs	–	(42,962	)	–		–		(42,962	)
Share-based payments	–	–		100,248		–		100,248
Total transactions with owners, recognised directly in equity	1,787,773	157,338		100,248		–		2,045,359
As at 31 December 2015 (Restated)	6,712,044	31,252,708		(13,477,853	)	(4,848,116	)	19,638,783
Loss for the year	–	–		(1,746,334	)	–		(1,746,334	)
Other comprehensive income:
Currency translation differences on translating foreign operations	–	–		–		9,315,180		9,315,180
Total comprehensive income for the year	–	–		(1,746,334	)	9,315,180		7,568,846
Issue of ordinary shares	5,007,299	5,005,321		–		–		10,012,620
Issue costs	–	(490,685	)	–		–		(490,685	)
Share-based payments	–	–		324,890		–		324,890
Total transactions with owners, recognised directly in equity	5,007,299	4,514,636		324,890		–		9,846,825
As at 31 December 2016	11,719,343	35,767,344		(14,899,297	)	4,467,064		37,054,454

A breakdown of other reserves is provided in note 18.

	Attributable to equity shareholders
	Share		Share		Retained		Merger
	capital		premium		losses		reserves		Total
Company	£		£		£		£		£
As at 1 January 2015 previously reported	4,924,271		31,095,370		(7,652,755	)	10,888,760		39,255,646
Refer note 22 d	–		–		(2,506,533	)	–		(2,506,533	)
As at 1 January 2015 (Restated)	4,924,271		31,095,370		(10,159,288	)	10,888,760		36,749,113
Loss and total comprehensive income for the year	–		–		421,479		–		421,479
Issue of ordinary shares	1,787,773		200,300		–		–		1,988,073
Issue costs	–		(42,962	)	–		–		(42,962	)
Share-based payments	–		–		100,248		–		100,248
Total transactions with owners, recognised directly in equity	1,787,773		157,338		100,248		–		2,045,359
As at 31 December 2015 (Restated)	6,712,044		31,252,708		(9,637,561	)	10,888,760		39,215,951
Loss and total comprehensive income for the year	–		–		(602,827	)	–		(602,827	)
Issue of ordinary shares	5,007,299		5,005,321		–		–		10,012,620
Issue costs	–		(490,685	)	–		–		(490,685	)
Share-based payments	–		–		324,890		–		324,890
Total transactions with owners, recognised directly in equity	5,007,299		4,514,636		324,890		–		9,846,825
As at 31 December 2016	11,719,343		35,767,344		(9,915,498	)	10,888,760		48,459,949

The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.

Consolidated Statement of Cash Flows

For the year ended 31 December 2016

		31 December 2016		31 December 2015 (Restated)
	Notes	£		£
Cash flows from operating activities
Loss before taxation		(1,746,334	)	(1,544,699	)
Finance income		(4,387	)	(14,918	)
Finance costs		220,817		63,093
Impairment of Peruvian reserves		–		17,200
Impairment of available-for-sale financial assets		–		253,006
Charge for share options granted		324,890		100,248
Gain on sale of property, plant and equipment		–		(24,453	)
Exchange differences		(177,940	)	251,409
Change in fair value of contingent consideration		260,632		26,969
Depreciation		1,084		1,419
Operating loss before changes in working capital		(1,121,238	)	(870,726	)
Decrease/(increase) in trade and other receivables		22,588		(19,635	)
Increase/(decrease) in trade and other payables		242,965		(37,154	)
Net cash used in operating activities		(855,685	)	(927,515	)
Cash flows from investing activities
Purchase of intangible assets		(1,253,212	)	(2,663,260	)
Proceeds from sale of property, plant and equipment		–		26,734
Interest received		4,387		14,918
Net cash used in investing activities		(1,248,825	)	(2,621,608	)
Cash flows from financing activities
Proceeds from issue of ordinary shares		9,000,000		1,550,000
Issue costs		(380,685	)	(42,962	)
Net cash generated from financing activities		8,619,315		1,507,038
Net increase/(decrease) in cash and cash equivalents		6,514,805		(2,042,085	)
Cash and cash equivalents at beginning of year		2,738,905		5,030,968
Exchange gain/(loss) on cash and cash equivalents		64,071		(249,978	)
Cash and cash equivalents at end of the year	12	9,317,781		2,738,905

Major non-cash transactions

On 8 August 2016 the Company issued 50,729,922 new Ordinary shares in the company at a price of £0.0199 per share to Xstrata as consideration for the acquisition of certain licences for the Glencore Araguaia Project from Xstrata Brasil Exploraçâo Mineral Ltda.

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

Company Statement of Cash Flows

For year ended 31 December 2016

		31 December 2016		31 December 2015 (Restated)
	Notes	£		£
Cash flows from operating activities
(Loss)/profit before taxation		(602,827	)	421,479
Finance income		(1,668	)	(6,952	)
Charge for share options granted		324,890		100,248
Exchange differences		283,555		(375,747	)
Change in fair value of contingent consideration		260,632		26,969
Depreciation		971		1,037
Operating profit before changes in working capital		265,553		30,212
Increase in trade and other receivables		(16,683	)	(4,921	)
Increase in trade and other payables		244,182		713
Net cash flows generated from operating activities		493,052		167,034
Cash flows from investing activities
Loans to subsidiary undertakings		(2,573,088	)	(3,321,742	)
Interest received		1,668		6,952
Net cash used in investing activities		(2,571,420	)	(3,314,790	)
Cash flows from financing activities
Proceeds from issue of ordinary shares		9,000,000		1,550,000
Issue costs		(380,685	)	(42,962	)
Net cash generated from financing activities		8,619,315		1,507,038
Net increase/(decrease) in cash and cash equivalents		6,540,947		(1,640,718	)
Exchange loss on cash and cash equivalents		34,779		–
Cash and cash equivalents at beginning of year		2,568,266		4,208,984
Cash and cash equivalents at end of the year	12	9,143,993		2,568,266

Major non-cash transactions

On 8 August 2016 the Company issued 50,729,922 new Ordinary shares in the company at a price of £0.0199 per share to Xstrata as consideration for the acquisition of certain licences for the Glencore Araguaia Project from Xstrata Brasil Exploraçâo Mineral Ltda.

The above Company Statement of Cash Flows should be read in conjunction with the accompanying notes.

Notes to the Financial Statements

1 General information

The principal activity of Horizonte Minerals Plc (‘the Company’) and its subsidiaries (together ‘the Group’) is the exploration and development of base metals. The Company’s shares are listed on the AIM market of the London Stock Exchange and on the Toronto Stock Exchange. The Company is incorporated and domiciled in England and Wales. The address of its registered office is 26 Dover Street, London W1S 4LY.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these Financial Statements are set out below. These policies have been consistently applied to all the years presented.

2.1 Basis of preparation

These Financial Statements have been prepared in accordance with International Financial Reporting Standards (‘IFRSs’) and IFRS interpretations Committee (‘IFRS IC’) interpretations as adopted by the European Union (‘EU’) and with IFRS and their interpretations issued by the IASB. The consolidated financial statements have also been prepared in accordance with and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Financial Statements have been prepared under the historical cost convention as modified by the revaluation of available-for-sale financial assets.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s Accounting Policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements, are disclosed in Note 4.

2.2 Changes in accounting policy and disclosures

a) New and amended standards adopted by the Group

There are no IFRSs or IFRIC interpretations that were effective for the first time for the financial year beginning 1 January 2016 that have had a material impact on the Group or Company.

b) New and amended standards, and interpretations issued but not yet effective for the financial year beginning 1 January 2016 and not early adopted

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the financial statements are listed below. The Group intends to adopt these standards, if applicable, when they become effective. Unless stated below, there are no IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

Standard	Effective Date
IFRS 15 Revenue from Contracts with Customers	01-Jan-18
IFRS 9 Financial Instruments	01-Jan-18
IFRS 16 Leases *	01-Jan-19

*Subject to EU endorsement

The only standard which is anticipated to be significant or relevant to the Group is IFRS 9 “Financial Instruments”, the Group is in the process of assessing the impact of the standards on the Financial Statements. Both IFRS 15 and IFRS 16 are not expected to have a material impact on the Group at this stage of the Group’s operations.

2.3 Basis of consolidation

Horizonte Minerals Plc was incorporated on 16 January 2006. On 23 March 2006 Horizonte Minerals Plc acquired the entire issued share capital of Horizonte Exploration Limited (HEL) by way of a share for share exchange. The transaction was treated as a group reconstruction and was accounted for using the merger accounting method as the entities were under common control before and after the acquisition.

Subsidiaries are entities controlled by the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee.
• Rights arising from other contractual arrangements.
• The Group’s voting rights and potential voting rights.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Other than for the acquisition of HEL as noted above, the Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred unless they result from the issuance of shares, in which case they are offset against the premium on those shares within equity.

If an acquisition is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or a liability is recognised in accordance with IAS 39 either in profit or loss or as a change in other comprehensive income. The unwinding of the discount on contingent consideration liabilities is recognised as a finance charge within profit or loss. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with policies adopted by the Group.

Investments in subsidiaries are accounted for at cost less impairment.

The following 100% owned subsidiaries have been included within the consolidated Financial Statements:

Subsidiary undertaking		Held		Registered Address		Country of incorporation		Nature of business
Horizonte Exploration Ltd		Directly		26 Dover Street, London, W1S 4LY		England		Mineral Exploration
Horizonte Minerals (IOM) Ltd		Indirectly		Devonshire House, 15 St Georges St, Douglas, Isle of Man		Isle of Man		Holding company
HM Brazil (IOM) Ltd		Indirectly		Devonshire House, 15 St Georges St, Douglas, Isle of Man		Isle of Man		Holding company
Cluny (IOM) Ltd		Indirectly		Devonshire House, 15 St Georges St, Douglas, Isle of Man		Isle of Man		Holding company
Champol (IOM) ltd		Indirectly		Devonshire House, 15 St Georges St, Douglas, Isle of Man		Isle of Man		Holding company
Horizonte Nickel (IOM) Ltd		Indirectly		Devonshire House, 15 St Georges St, Douglas, Isle of Man		Isle of Man		Holding company
HM do Brasil Ltda		Indirectly		CNPJ 07.819.038/0001-30 com sede na Avenida Amazonas, 2904, loja 511, Bairro Prado, Belo Horizonte – MG. CEP: 30.411-186		Brazil		Mineral Exploration
Araguaia Niquel Mineração Ltda		Indirectly		CNPJ 97.515.035/0001-03 com sede na Avenida Amazonas, 2904, loja 511, Bairro Prado, Belo Horizonte – MG. CEP: 30.411-186		Brazil		Mineral Exploration
Lontra Empreendimentos e Participações Ltda		Indirectly		CNPJ 11.928.960/0001-32 com sede na Avenida Amazonas, 2904, loja 511, Bairro Prado, Belo Horizonte – MG. CEP: 30.411-186		Brazil		Mineral Exploration
Typhon Brasil Mineração Ltda		Indirectly		CNPJ 23.282.640/0001-37 com sede Alameda Ezequiel Dias, n. 427, 20 andar, bairro Funcionários, Município de Belo Horizonte, Estado de Minas Gerais, CEP 30.130-110.		Brazil		Mineral Exploration
Trias Brasil Mineração Ltda		Indirectly		CNPJ 23.282.280/0001-73 com sede na Alameda Ezequiel Dias, n. 427, 20 andar, bairro Funcionários, Município de Belo Horizonte, Estado de Minas Gerais, CEP 30.130-110		Brazil		Mineral Exploration

2.4 Going concern

The Group’s business activities together with the factors likely to affect its future development, performance and position are set out in the Chairman’s Statement on pages 4 and 5; in addition note 3 to the Financial Statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposure to credit and liquidity risk.

The Financial Statements have been prepared on a going concern basis. Although the Group’s assets are not generating revenues and an operating loss has been reported, the Directors consider that the Group has sufficient funds to undertake its operating activities for a period of at least the next 12 months including any additional expenditure required in relation to its current exploration projects. The Group has cash reserves which are considered sufficient by the Directors to fund the Group’s committed expenditure both operationally and on its exploration projects for the foreseeable future. However, as additional projects are identified and the Araguaia project moves towards production, additional funding will be required.

As a result of considerations noted above, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing these Financial Statements.

2.5 Intangible Assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets, liabilities and contingent liabilities of the acquired subsidiary at the date of acquisition. Goodwill arising on the acquisition of subsidiaries is included in ‘intangible assets’. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segment.

(b) Exploration and evaluation assets

The Group capitalises expenditure in relation to exploration and evaluation of mineral assets when the legal rights are obtained. Expenditure included in the initial measurement of exploration and evaluation assets and which are classified as intangible assets relate to the acquisition of rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource.

Exploration and evaluation assets arising on business combinations are included at their acquisition-date fair value in accordance with IFRS 3 (revised) ‘Business combinations’. Other exploration and evaluation assets and all subsequent expenditure on assets acquired as part of a business combination are recorded and held at cost.

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount. The assessment is carried out by allocating exploration and evaluation assets to cash generating units, which are based on specific projects or geographical areas.

Whenever the exploration for and evaluation of mineral resources does not lead to the discovery of commercially viable quantities of mineral resources or the Group has decided to discontinue such activities of that unit, the associated expenditures are written off to profit or loss.

2.6 Property, plant and equipment

All property, plant and equipment is stated at historic cost less accumulated depreciation. Historic cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All repairs and maintenance costs are charged to profit or loss during the financial period in which they are incurred.

Depreciation is charged on a straight-line basis so as to write off the cost of assets, over their estimated useful lives, using the straight-line method, on the following bases:

Office equipment	25%
Vehicles and other field equipment	25% – 33%

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount.

2.7 Impairment of non-financial assets

Assets that have an indefinite useful life, such as goodwill or intangible exploration assets not ready to use, are not subject to amortisation and are tested annually for impairment. Intangible assets that are subject to amortisation and property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

2.8 Foreign currency translation

(a) Functional and presentation currency

Items included in the Financial Statements of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’). The functional currency of the UK and Isle of Man entities is Pounds Sterling and the functional currency of the Brazilian entities is Brazilian Real. The Consolidated Financial Statements are presented in Pounds Sterling, rounded to the nearest pound, which is the Company’s functional and Group’s presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where such items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

(c) Group companies

The results and financial position of all the Group’s entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

	(1)	assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
	(2)	each component of profit or loss is translated at average exchange rates during the accounting period (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
	(3)	all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of monetary items receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future are taken to other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in profit or loss as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and retranslated at the end of each reporting period.

2.9 Financial assets

The Group classifies its financial assets as loans and receivables.

(a) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method, less impairment. The Group’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cash equivalents’ in the Consolidated Statement of Financial Position and loans to group undertakings in the Company Statement of Financial Position.

Derecognition

A financial asset is derecognised when the rights to receive cash flows from the asset have expired.

2.10 Cash and cash equivalents

In the Statement of Financial Position and Statement of Cash Flows, cash and cash equivalents comprise cash at bank and in hand and demand deposits with banks and other financial institutions, that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

2.11 Impairment of financial assets

(a) Assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the Consolidated Income Statement.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the Consolidated Income Statement.

2.12 Taxation

The tax credit or expense for the period comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The charge for current tax is calculated on the basis of the tax laws enacted or substantively enacted by the end of the reporting period in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax is accounted for using the liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax assets are recognised on tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Deferred tax is calculated at the tax rates (and laws) that have been enacted or substantively enacted by the Statement of Financial Position date and are expected to apply to the period when the asset is realised or the liability is settled.

Deferred tax assets and liabilities are not discounted.

2.13 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.14 Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.

Fair value through profit or loss

This category comprises the contingent consideration which are carried in the consolidated statement of financial position at fair value with changes in fair value recognised in the consolidated statement of comprehensive income.

Other financial liabilities

Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

2.15 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

2.16 Operating leases

Leases of assets under which a significant amount of the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Operating lease payments are charged to the Income Statement on a straight-line basis over the period of the respective leases.

2.17 Share-based payments and incentives

The Group operates equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of employee services received in exchange for the grant of share options are recognised as an expense. The total expense to be apportioned over the vesting period is determined by reference to the fair value of the options granted:

• including any market performance conditions;
• excluding the impact of any service and non-market performance vesting conditions; and
• including the impact of any non-vesting conditions.

Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period the Group revises its estimate of the number of options that are expected to vest.

It recognises the impact of the revision of original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

When options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

The fair value of goods or services received in exchange for shares is recognised as an expense.

2.18 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer, the Company’s chief operating decision-maker (“CODM”).

2.19 Finance income

Interest income is recognised using the effective interest method, taking into account the principal amounts outstanding and the interest rates applicable.

2.20 Provisions and Contingent Liabilities

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as finance cost.

Contingent liabilities are potential obligations that arise from past events and whose existence will only be confirmed by the occurrence of one or more uncertain future events that, however, are beyond the control of the Group. Furthermore, present obligations may constitute contingent liabilities if it is not probable that an outflow of resources will be required to settle the obligation, or a sufficiently reliable estimate of the amount of the obligation cannot be made.

3 Financial risk management

3.1 Financial risk factors

The main financial risks to which the Group’s activities are exposed are liquidity and fluctuations on foreign currency. The Group’s overall risk management programme focusses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

Risk management is carried out by the Board of Directors under policies approved at the quarterly Board meetings. The Board frequently discusses principles for overall risk management including policies for specific areas such as foreign exchange.

(a) Liquidity risks

In keeping with similar sized mineral exploration groups, the Group’s continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital. The Group monitors its cash and future funding requirements through the use of cash flow forecasts.

All cash, with the exception of that required for immediate working capital requirements, is held on short-term deposit.

(b) Foreign currency risks

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Brazilian Real, US Dollar and the Pound Sterling.

Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations that are denominated in a foreign currency. The Group holds a proportion of its cash in US Dollars and Brazilian Reals to hedge its exposure to foreign currency fluctuations and recognises the profits and losses resulting from currency fluctuations as and when they arise. The volume of transactions is not deemed sufficient to enter into forward contracts.

At 31 December 2016, if the Brazilian Real had weakened/strengthened by 20% against Pound Sterling and US Dollar with all other variables held constant, post tax loss for the year would have been approximately £41,448 lower/higher mainly as a result of foreign exchange losses/gains on translation of Brazilian Real expenditure and denominated bank balances.

(c) Interest rate risk

As the Group has no borrowings, it is not exposed to interest rate risk on financial liabilities. The Group’s interest rate risk arises from its cash held on short-term deposit for which the Directors use a mixture of fixed and variable rate deposits. As a result, fluctuations in interest rates are not expected to have a significant impact on profit or loss or equity.

(d) Price risk

Given the size and stage of the Group’s operations, the costs of managing exposure to commodity price risk exceed any potential benefits. The Directors will revisit the appropriateness of this policy should the Group’s operations change in size or nature.

(e) Credit risk

Credit risk arises from cash and cash equivalents and outstanding receivables. The Group maintains cash and short-term deposits with a variety of credit worthy financial institutions and considers the credit ratings of these institutions before investing in order to mitigate against the associated credit risk.

3.2 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, in order to provide returns for shareholders and to enable the Group to continue its exploration and evaluation activities. The Group has no debt at 31 December 2016 and defines capital based on the total equity of the Group. The Group monitors its level of cash resources available against future planned exploration and evaluation activities and may issue new shares in order to raise further funds from time to time.

As indicated above, the Group holds cash reserves on deposit at several banks and in different currencies until they are required and in order to match where possible with the corresponding liabilities in that currency.

3.3 Fair value estimation

The carrying values of trade receivables and payables are assumed to be approximate to their fair values, due to their short-term nature. The fair value of contingent consideration is estimated by discounting the future expected contractual cash flows at the Group’s current cost of capital of 7% based on the interest rate available to the Group for a similar financial instrument.

4 Critical accounting estimates and judgements

The preparation of the Financial Statements in conformity with IFRSs requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period and the reported amount of expenses during the year. Actual results may vary from the estimates used to produce these Financial Statements.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Significant items subject to such estimates and assumptions include, but are not limited to:

4.1 Impairment of exploration and evaluation costs

Exploration and evaluation costs have a carrying value at 31 December 2016 of £31,737,737 (2015: £20,159,327 ). Each exploration project is subject to an annual review by either a consultant or senior company geologist to determine if the exploration results returned to date warrant further exploration expenditure and have the potential to result in an economic discovery. This review takes into consideration long-term metal prices, anticipated resource volumes and grades, permitting and infrastructure. In the event that a project does not represent an economic exploration target and results indicate there is no additional upside, a decision will be made to discontinue exploration.

4.2 Estimated impairment of goodwill

Goodwill has a carrying value at 31 December 2016 of £280,059 (2015: £192,028) which is included in intangible assets. The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.7.

Management has concluded that there is no impairment charge necessary to the carrying value of goodwill. See also note 10 to the Financial Statements.

4.3 Contingent consideration

Contingent consideration has a carrying value of £3,643,042, at 31 December 2016 (2015: £3,161,591). there are two contingent consideration arrangements in place as at 31 December 2016:

•	A contingent consideration arrangement that requires the Group to pay the former owners of Teck Cominco Brasil S.A (subsequently renamed Araguaia Niquel Mineração Ltda) 50% of the tax effect upon utilisation of the tax losses existing in Teck Cominco Brasil S.A at the date of acquisition. Under the terms of the acquisition agreement, tax losses that existed at the date of acquisition and which are subsequently utilised in a period greater than 10 years from that date are not subject to the contingent consideration arrangement.
	This acquisition was accounted for as a business combination and an assessment of the fair value of the contingent consideration was made at the date of acquisition. This fair value is reassessed in each subsequent accounting period. In arriving at an estimate of the fair value management make an assessment of the probability of utilisation of all or part of the tax losses by the end of the 10 year period which is August 2020. The Group has used discounted cash flow analysis to determine when it is anticipated that the tax losses will be utilised and any potential contingent consideration paid. These cash flows could be affected by movements in a number of factors including the timing of the development and commissioning of the project, commodity prices, operating costs, capital expenditure, production levels, grades, recoveries and interest rates. Because of the condition of the acquisition agreement to utilise tax losses prior to August 2020 a critical assumption in the assessment of value of the contingent consideration is the timing of commencement of profitable production.
	As explained in note 21, following a reassessment of the IFRS accounting requirements, management has determined that the value attributed to the contingent consideration must be reviewed at the end of each reporting period and adjusted to reflect the current best estimate. This review was not completed in prior years and accordingly, a restatement of prior years’ financial statements has been made.
•	A contingent consideration arrangement that requires the Group to pay Xstrata Brasil Mineração Ltda US$1,000,000 after the date of issuance of a Feasibility Study comprising the Araguaia project and the Vale dos Sonhos (‘VdS’) and Serra do Tapa (‘SdT’) project areas (‘GAP’) (together the ‘Enlarged Project’), to be satisfied in shares in the Company (at the 5 day volume weighted average price taken on the tenth business day after the date of such issuance) or cash, at the election of the Company; and remaining consideration of US$5,000,000 to be paid in cash, as at the date of first commercial production from any of the resource areas within the Enlarged Project area. The critical assumptions relating to the assessment of the contingent consideration of S$5,000,000 are similar to those described above for the contingent consideration payable to the former owners of Teck Cominco Brasil S.A.
	The Contingent consideration is considered to be a level 3 hierarchy valuation, the following are unobservable inputs for the valuation model: Discount rate and probability factor. In addition, the model includes the foreign exchange rate.
	Management have sensitized the fair value calculation to reasonable changes in the unobservable inputs and note that if the discount rate were to increase to 10% then the FV would decrease to £3,387,315.
	Management have sensitized the probability factor and note that a change in the probability weighting of 25% would cause the overall value of the contingent consideration to increase by £96,207.

A contingent consideration arrangement that requires the Group to pay Xstrata Brasil Mineração Ltda US$1,000,000 after the date of issuance of a Feasibility Study comprising the Araguaia project and the Vale dos Sonhos (‘VdS’) and Serra do Tapa (‘SdT’) project areas (‘GAP’) (together the ‘Enlarged Project’), to be satisfied in shares in the Company (at the 5 day volume weighted average price taken on the tenth business day after the date of such issuance) or cash, at the election of the Company; and remaining consideration of US$5,000,000 to be paid in cash, as at the date of first commercial production from any of the resource areas within the Enlarged Project area. The critical assumptions relating to the assessment of the contingent consideration of S$5,000,000 are similar to those described above for the contingent consideration payable to the former owners of Teck Cominco Brasil S.A.

There has been no change in valuation technique during the period.

4.4 Current and deferred taxation

The Group is subject to income taxes in numerous jurisdictions. Judgment is required in determining the worldwide provision for such taxes. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the current and deferred income tax assets and liabilities in the period in which such determination is made.

Deferred tax liabilities have been recognised on the fair value gains in exploration assets arising on the acquisitions of Araguaia Niquel Mineração Ltda (formerly Teck Cominco Brasil S.A) and Lontra Empreendimentos e Participações Ltda. A deferred tax asset in respect of the losses has been recognised on acquisition of Araguaia Niquel Mineração Ltda to the extent that it can be set against the deferred tax liability arising on the fair value gains. In determining whether a deferred tax asset in excess of this amount should be recognized management must make an assessment of the probability that the tax losses will be utilized and a deferred tax asset is only recognised if it is considered probable that the tax losses will be utilized.

As explained in note 21, following a reassessment of the IFRS accounting requirements, management has determined based on information available at the time of preparation of the 2010 financial statements, the utilization of these losses had a lower probability at the time of the acquisition in 2010 and a restatement derecognizing the deferred tax asset has been made. Management review the position each financial period and this assessment remains.

4.5 Other areas

Other estimates include but are not limited to future cash flows associated with assets, useful lives for depreciation and fair value of financial instruments.

5 Segmental reporting

The Group operates principally in the UK and Brazil, with operations managed on a project by project basis within each geographical area. Activities in the UK are mainly administrative in nature whilst the activities in Brazil relate to exploration and evaluation work. The reports used by the chief operating decision-maker are based on these geographical segments.

2016	UK 2016 £		Brazil 2016 £		Other 2016 £		Total 2016 £
Administrative expenses	(802,409	)	(207,214	)	–		(1,009,623	)
Loss on foreign exchange	46,454		18,787		–		65,241
Loss from operations per reportable segment	(755,955	)	(188,427	)	–		(944,382	)
Depreciation charges	(970	)	(114	)	–		(1,084	)
Additions to non-current assets	–		11,578,410		–		11,578,410
Reportable segment assets	9,309,132		32,062,800		–		41,371,932
Reportable segment non-current assets	–		32,018,658		–		32,018,658
Reportable segment liabilities	3,969,966		347,511		–		4,317,477
2015 (Restated)	UK 2015 £		Brazil 2015 £		Other 2015 £		Total 2015 (Restated) £
Administrative expenses	(662,305	)	(189,234	)	(13,353	)	(864,892	)
Loss) on foreign exchange	(114,838	)	(136,571	)	–		(251,409	)
Loss from operations per reportable segment	(777,143	)	(325,805	)	(13,353	)	(1,116,301	)
Depreciation charges	(1,037	)	(382	)	–		(1,419	)
Additions to non-current assets	–		(645,313	)	–		(645,313	)
Reportable segment assets	2,687,317		20,455,743		–		23,143,060
Reportable segment non-current assets	–		20,363,243		–		20,363,243
Reportable segment liabilities	3,249,980		254,296		–		3,504,276

Inter segment revenues are calculated and recorded in accordance with the underlying intra group service agreements.

A reconciliation of adjusted loss from operations per reportable segment to loss before tax is provided as follows:

	2016 £		2015 (Restated) £
Loss from operations per reportable segment	(944,382	)	(1,116,301	)
Changes in fair value of contingent consideration (refer note 17)	(260,632	)	(26,969	)
Charge for share options granted	(324,890	)	(100,248	)
Impairment of available-for-sale asset	–		(253,006	)
Finance income	4,387		14,918
Finance costs	(220,817	)	(63,093	)
Loss for the year from continuing operations	(1,746,334	)	(1,544,699	)

6 Expenses by nature

	2016	2015 (Restated)
Group	£	£
Charge for share options granted	324,890	100,248
Depreciation (note 11)	1,084	1,419
Operating lease charges	36,053	95,182
Profit on disposal of property, plant and equipment	–	(24,453	)

7 Auditor remuneration

During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor and its associates:

Group	2016 £	2015 £
Fees payable to the Company’s auditor and its associates for the audit of the parent company and consolidated financial statements (2015: PKF Littlejohn)	32,000	37,500
Fees payable to the Company’s auditor and its associates for other services:
– Audit related assurance services (paid to PKF Littlejohn)	5,000	7,000
– Tax compliance services	2,000	1,900

8 Finance income and costs

Group	2016 £		2015 (Restated) £
Finance income:
– Interest income on cash and short-term bank deposits	4,387		14,918
Finance costs:
– Contingent consideration: unwinding of discount	(220,817	)	(63,093	)
Net finance costs	(216,430	)	(48,175	)

9 Income Tax

Group	2016 £	2015 (Restated) £
Tax charge:
Current tax charge for the year	–	–
Deferred tax charge for the year	–	–
Tax on loss for the year	–	–

Reconciliation of current tax

Group	2016 £		2015 (Restated) £
Loss before income tax	(1,746,334	)	(1,544,699	)
Current tax at 22.87% (2015: 32.52%)	(399,387	)	(502,336	)
Effects of:
Expenses not deducted for tax purposes	9,080		46,319
Utilisation of tax losses brought forward	–		(150,480	)
Tax losses carried forward for which no deferred income tax asset was recognised – UK	–		–
Tax losses carried forward for which no deferred income tax asset was recognised – Brazil	408,466		606,497
Total tax	–		–

No tax charge or credit arises on the loss for the year.

The weighted average applicable tax rate of 22.87% used is a combination of the 20% effective standard rate of corporation tax in the UK, 34% Brazilian corporation tax. The weighted average applicable tax rate has decreased from 32.52% to 22.87% as a greater proportion of loss before income tax arose in the UK.

Deferred income tax

An analysis of deferred tax assets and liabilities is set out below.

Group	2016 £		2015 (Restated) £
Deferred tax assets	4,744,885		6,920,143
Deferred tax liabilities
– Deferred tax liability to be settled after more than 12 months	(5,027,335	)	(7,113,808	)
Deferred tax liabilities (net)	(282,450	)	(193,665	)

The movement on the net deferred tax liabilities is as follows:

Group	2016 £		2015 (Restated) £
At 1 January	(193,665	)	(273,273	)
Exchange differences	(88,785	)	79,608
At 31 December	(282,450	)	(193,665	)

Deferred tax assets are recognised on tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable.

Deferred tax liabilities are recognised in respect of fair value adjustments to the carrying value of intangible assets as a result of the acquisition of such assets.

The Group has tax losses of approximately £18,132,502 (2015: £17,363,000) in Brazil and excess management charges of approximately £2,492,408 (2015: £1,690,000) in the UK available to carry forward against future taxable profits. Deferred tax asset have been recognised up to the amount of the deferred tax liability arising on the fair value adjustments potential deferred tax assets of £6,663,532 have not been recognised.

10 Intangible assets

Intangible assets comprise exploration licenses, exploration and evaluation costs and goodwill. Exploration and evaluation costs comprise acquired and internally generated assets.

Group	Goodwill £		Exploration Licenses £		Exploration and evaluation costs £		Total £
Cost
At 1 January 2015 (Restated)	270,925		–		20,804,640		21,075,565
Additions	–		3,174,275		2,540,833		5,715,108
Exchange rate movements	(78,897	)	–		(6,360,421	)	(6,439,318	)
At 31 December 2015 (Restated)	192,028		3,174,275		16,985,052		20,351,355
Additions	–		1,012,620		1,253,212		2,265,831
Exchange rate movements	88,032		1,458,290		7,854,288		9,400,610
Net book amount at 31 December 2016	280,060		5,645,185		26,092,551		32,017,796

(a) Exploration and evaluation assets

No indicators of impairment were identified during the year.

In October 2016, a Canadian NI 43-101 compliant Pre-Feasibility Study (‘PFS’) was published by the Company regarding the enlarged Araguaia Project which included the areas recently acquired from Glencore Xstrata. The financial results and conclusions of the PFS clearly indicate the economic viability of the Araguaia Project. The Directors undertook an assessment of impairment through evaluating the results of the PFS and judged that no impairment was required with regards to the Araguaia Project.

(b) Goodwill

Goodwill arose on the acquisition of Lontra Empreendimentos e Participações Ltda in 2010. The Directors have determined the recoverable amount of goodwill based on the same assumptions used for the assessment of the Lontra exploration project detailed above. As a result of this assessment, the Directors have concluded that no impairment charge is necessary against the carrying value of goodwill.

Impairment reviews for exploration and evaluation assets are carried out either on a project by project basis or by geographical area.

The adjacent Araguaia/Lontra/Vila Oito and Floresta exploration sites (‘the Araguaia Project’), together with the Vale dos Sonhos deposit acquired from Xstrata Brasil Mineração Ltda comprise a resource of a sufficient size and scale to allow the Company to create a significant single nickel project. For this reason, at the current stage of development, these two projects are viewed and assessed for impairment by management as a single cash generating unit.

The mineral concession for the Vale dos Sonhos deposit was acquired from Xstrata Brasil Mineração Ltda, a subsidiary of Glencore Canada Corporation, in November 2015.

The recoverable amount has been determined by reference to the PFS undertaken during the year on the Araguaia Project. The key inputs and assumptions in deriving the value in use were, the discount rate of 8%, Nickel price of US$12,000/t and a life of mine of 28years.

Sensitivity to changes in assumptions

For the base case NPV8 of the Araguaia Project of US$581 million using a nickel price of US$14,000/t and US$328 million using US$12,000/t as per the PFS to be reduced to the book value of the Araguaia Project as at 31 December 2016, the discount rate applied to the cash flow model would need to be increased from 8% to 21%.

11 Property, plant and equipment

Group	Vehicles and other field equipment £		Office equipment £		Total £
Cost
At 1 January 2015	152,089		14,730		166,819
Disposals	(40,089	)	–		(40,089	)
Foreign exchange movements	(37,353	)	(2,134	)	(39,487	)
At 31 December 2015	74,647		12,596		87,243
Foreign exchange movements	31,657		1,802		33,459
At 31 December 2016	106,304		14,398		120,702
Accumulated depreciation
At 1 January 2015	104,117		8,312		112,429
Charge for the year	26,245		2,469		28,714
Disposals	(26,916	)	–		(26,916	)
Foreign exchange movements	(37,807	)	(1,065	)	(38,872	)
At 31 December 2015	65,639		9,716		75,355
Charge for the year	11,766		2,614		14,380
Foreign exchange movements	28,320		1,785		30,105
At 31 December 2016	105,725		14,115		119,840
Net book amount as at 31 December 2016	579		283		862
Net book amount as at 31 December 2015	9,008		2,880		11,888
Net book amount as at 1 January 2015	47,972		6,418		54,390

Depreciation charges of £13,296 (2015: £27,295) have been capitalised and included within intangible exploration and evaluation asset additions for the year. The remaining depreciation expense for the year ended 31 December 2016 of £1,084 (2015: £1,419) has been charged in ‘administrative expenses’ under ‘Depreciation.’

Company	Field equipment £	Office equipment £	Total £
Cost
At 1 January 2015	4,208	7,403	11,611
Additions	–	–	–
At 31 December 2015 and 2016	4,208	7,403	11,611
Accumulated depreciation
At 1 January 2015	4,208	5,112	9,320
Charge for the year	–	1,037	1,037
At 31 December 2015	4,208	6,149	10,357
Charge for the year	–	971	971
At 31 December 2016	4,208	7,120	11,328
Net book amount as at 31 December 2016	–	283	283
Net book amount as at 31 December 2015	–	1,254	1,254
Net book amount as at 1 January 2015	–	2,291	2,291

12 Cash and cash equivalents

	Group		Company
	2016 £	2015 £	2016 £	2015 £
Cash at bank and on hand	9,250,281	2,676,160	9,094,308	2,519,018
Short-term deposits	67,500	62,745	49,685	49,248
	9,317,781	2,738,905	9,143,993	2,568,266

The Group’s cash at bank and short-term deposits are held with institutions with the following credit ratings (Fitch):

	Group		Company
	2016 £	2015 £	2016 £	2015 £
A	9,217,380	2,616,981	9,094,308	2,519,018
BBB-	100,401	121,924	49,685	49,248
	9,317,781	2,738,905	9,143,993	2,568,266

13 Share capital

Group and Company	2016 Number	2016 £	2015 Number	2015 £
Issued and fully paid
Ordinary shares of 1p each
At 1 January	671,204,378	6,712,044	492,427,105	4,924,271
Issue of ordinary shares	500,729,922	5,007,299	178,777,273	1,787,773
At 31 December	1,171,934,300	11,719,343	671,204,378	6,712,044

Share capital comprises amount subscribed for shares at the nominal value.

2016

On 8 August 2016, a total of 50,729,922 new ordinary shares were issued at the prevailing market price of £0.0199 per share in consideration for the purchase of the Vale dos Sonhos mineral concession from Xstrata Brasil Mineração Ltda.

On 30 November 2016, a total of 374,000,000 shares were issued through a private placement at a price of £0.02 per share to raise £7,480,000 before expenses.

On 2 December 2016, a total of 76,000,000 shares were issued through a private placement at a price of £0.02 per share to raise £1,520,000 before expenses.

2015

On 2 October 2015, a total of 112,500,000 shares were issued through a private placement at a price of £0.01 per share to raise £1,125,000 before expenses.

On 9 October 2015, a total of 42,500,000 shares were issued through a private placement at a price of £0.01 per share to raise £425,000 before expenses.

On 25 November 2015, a total of 23,777,273 shares were issued at £0.0184 per share in consideration for the purchase of the Vale dos Sonhos mineral concession from Xstrata Brasil Mineração Ltda.

14 Share premium

Group and Company	2016 £		2015 £
At 1 January	31,252,708		31,095,370
Premium arising on issue of ordinary shares	5,005,662		200,300
Issue costs	(490,685	)	(42,962	)
At 31 December	35,767,344		31,252,708

Share premium comprises the amount subscribed for share capital in excess of nominal value.

15 Share-based payments

The Directors have discretion to grant options to the Group employees to subscribe for Ordinary shares up to a maximum of 10% of the Company’s issued share capital. One third of options are exercisable at each six months anniversary from the date of grant, such that all options are exercisable 18 months after the date of grant and all lapse on the tenth anniversary of the date of grant or the holder ceasing to be an employee of the Group. Should holders cease employment then the options remain valid for a period of 3 months after cessation of employment, following which they will lapse. Neither the Company nor the Group has any legal or constructive obligation to settle or repurchase the options in cash.

Movements on number of share options and their related exercise price are as follows:

	Number of options 2016 £		Weighted average exercise price 2016 £		Number of options 2015 £		Weighted average exercise price 2015 £
Outstanding at 1 January	48,760,000		0.124		38,300,000		0.119
Forfeited	(8,450,000	)	0.092		(2,790,000	)	0.151
Granted	15,000,000		0.030		13,250,000		0.040
Outstanding at 31 December	55,310,000		0.079		48,760,000		0.096
Exercisable at 31 December	36,760,000		0.102		30,693,333		0.124

The options outstanding at 31 December 2016 had a weighted average remaining contractual life of 7.28 years (2015: 7.45 years).

The fair value of the share options was determined using the Black-Scholes valuation model.

The parameters used are detailed below.

Group and Company	2016 options		2015 options
Date of grant or reissue	01/09/2016		10/06/2015
Weighted average share price	2.03 pence		2.63 pence
Weighted average exercise price	3.00 pence		4.00 pence
Expiry date	31/08/2026		09/06/2025
Options granted	15,000,000		13,250,000
Volatility	64	%	75	%
Dividend yield	Nil		Nil
Option life	10 years		10 years
Annual risk free interest rate	2.83	%	2.83	%

The expected volatility is based on historical volatility for the six months prior to the date of grant. The risk free rate of return is based on zero yield government bonds for a term consistent with the option life.

The range of option exercise prices is as follows:

Range of exercise prices (GBP)	2016 Weighted average exercise price (GBP)	2016 Number of shares	2016 Weighted average remaining life expected (years)	2016 Weighted average remaining life contracted (years)	2015 Weighted average exercise price (GBP)	2015 Number of shares	2015 Weighted average remaining life expected (years)	2015 Weighted average remaining life contracted (years)
0-0.1	0.049	39,850,000	8.34	8.34	0.060	30,300,000	8.62	8.62
0.1-0.2	0.154	15,460,000	4.57	4.57	0.154	18,460,000	5.53	5.53

16 Other reserves

	Available-for-sale reserve		Merger reserve		Translation reserve		Other reserve		Total
Group	£		£		£		£		£
At 1 January 2015 (As previously reported)	(253,006	)	10,888,760		(9,909,255	)	(1,048,100	)	(321,601	)
Refer note 22 c	–		–		1,574,535		–		1,574,535
At 1 January 2015 (Restated)	(253,006	)	10,888,760		(8,334,720	)	(1,048,100	)	1,252,934
Permanent diminution taken to income	253,006		–		–		–		253,006
Currency translation differences	–		–		(6,354,056	)	–		(6,354,056	)
At 31 December 2015 (Restated)	–		10,888,760		(14,688,776	)	(1,048,100	)	(4,848,116	)
Other comprehensive income	–		–		–		–		–
Currency translation differences	–		–		9,315,180		–		9,315,180
At 31 December 2016	–		10,888,760		(5,373,596	)	(1,048,100	)	4,467,064

Company	Merger reserve £	Total £
At 1 January 2015 and 31 December 2015	10,888,760	10,888,760
At 1 January 2016 and 31 December 2016	10,888,760	10,888,760

The merger and other reserve as at 31 December 2016 arose on consolidation as a result of merger accounting for the acquisition of the entire issued share capital of Horizonte Exploration Limited during 2006 and represents the difference between the value of the share capital and premium issued for the acquisition and that of the acquired share capital and premium of Horizonte Exploration Limited.

Currency translation differences relate to the translation of Group entities that have a functional currency different from the presentation currency (refer note 2.8). Movements in the translation reserve are linked to the changes in the value of the Brazilian Real against the Pound Sterling: the intangible assets of the Group are located in Brazil, and their functional currency is the Brazilian Real, which increased in value against Sterling during the year.

The available for sale reserve represents changes in the fair value of assets that are held available for sale.

17 Trade and other payables

	Group		Company
	2016	2015 (Restated)	2016	2015 (Restated)
	£	£	£	£
Non-current
Contingent consideration payable to former owners of Teck Cominco Brasil S.A.	115,100	354,713	115,100	354,713
Contingent consideration payable to Xstrata Brasil Mineração Ltda (refer note 27)	3,527,942	2,806,878	3,527,942	2,806,878
Total contingent consideration	3,643,042	3,161,591	3,643,042	3,161,591
Current
Trade and other payables	229,046	16,038	148,985	10,377
Amounts due to related parties (refer note 22)	–	–	413,930	413,930
Social security and other taxes	19,088	21,519	19,088	15,533
Accrued expenses	143,851	111,463	165,052	63,033
	391,985	149,020	747,055	502,873
Total trade and other payables	4,035,027	3,310,611	4,390,097	3,664,464

Trade and other payables include amounts due of £65,053 (2015: £65,748) in relation to exploration and evaluation activities.

Contingent Consideration payable to the former owners of Teck Cominco Brasil S.A.

The fair value of the contingent consideration arrangement with the former owners of Teck Cominco Brasil S.A. was estimated at the acquisition date according to the probability and timing of when future taxable profits will arise against which the tax losses may be utilised in accordance with the terms of the acquisition agreement.

As explained in note 21 the estimate of fair value has been restated and is now assessed to be £115,100 (2015: £354,713). The critical assumptions underlying the fair value estimate are set out in note 4.3. Estimates were also based on the current rates of tax on profits in Brazil of 34% and a discount factor of 7.0% was applied to the future dates at which the tax losses will be utilised and consideration paid.

Contingent Consideration payable to Xstrata Brasil Mineração Ltda

On 28 September 2015 the Company announced that it had reached agreement to indirectly acquire through wholly owned subsidiaries in Brazil the advanced high-grade Glencore Araguaia nickel project (‘GAP’) in north central Brazil. GAP is located in the vicinity of the Company’s Araguaia Project.

Pursuant to a conditional asset purchase agreement (‘Asset Purchase Agreement’) between, amongst others, the Company and Xstrata Brasil Exploraçâo Mineral Ltda (‘Xstrata’), a wholly-owned subsidiary of Glencore Canada Corporation (‘Glencore’), the Company has agreed to pay a total consideration of US$8 million to Xstrata, which holds the title to GAP. The consideration is to be paid according the following schedule;

• US$2,000,000 in ordinary shares in the capital of the Company which as at 31 December 2016 had been settled by way of issuing new shares in the Company.
• US$1,000,000 after the date of issuance of a joint Feasibility Study for the combined Araguaia & GAP project areas, to be satisfied in HZM Shares (at the 5 day volume weighted average price taken on the tenth business day after the date of such issuance) or cash, at the election of the Company; and
• The remaining US$5,000,000 consideration will be paid in cash, as at the date of first commercial production from any of the resource areas within the Enlarged Project area. Following transfer of the concession for the VdS deposit area to a subsidiary of the Company, this has been included in contingent consideration payable.

The critical assumptions underlying the treatment of the contingent consideration are set out in note 4.3.

As at 31 December 2016, there was a finance expense of £193,868 (2015: £14,505) recognised in finance costs within the Statement of Comprehensive Income in respect of the contingent consideration arrangement, as the discount applied to the contingent consideration at the date of acquisition was unwound.

18 Dividends

No dividend has been declared or paid by the Company during the year ended 31 December 2016 (2015: nil).

19 Earnings per share

(a) Basic

The basic loss per share of 0.240p loss per share (2015 loss per share: 0.290p) is calculated by dividing the loss attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year.

	2016		2015
Group	£		£
Loss attributable to owners of the parent	(1,746,334	)	(1,544,699	)
Weighted average number of ordinary shares in issue	727,096,642		531,868,151

(b) Diluted

The basic and diluted loss per share for the years ended 31 December 2016 and 31 December 2015 are the same as the effect of the exercise of share options would be anti-dilutive.

Details of share options that could potentially dilute earnings per share in future periods are set out in note 15.

20 Related party transactions

The following transactions took place with subsidiaries in the year:

A fee totalling £312,043 (2015: £232,829) was charged to HM do Brazil Ltda, £872,784 (2015: £639,814) to Araguaia Niquel Mineração Ltda and £58,806 to Typhon Brasil Mineração Ltda by Horizonte Minerals Plc in respect of consultancy services provided and funding costs.

Amounts totalling £782,926 (2015: £4,919,360) were lent to HM Brazil (IOM) Ltd, HM do Brasil Ltda, Araguaia Niquel Mineraçao Ltda and Typhon Brasil Mineração Ltda to finance exploration work during 2016, by Horizonte Minerals Plc. Interest is charged at an annual rate of 6% on balances outstanding during the year.

Balances with subsidiaries at the year end were:

	2016	2016	2015	2015
	Assets	Liabilities	Assets	Liabilities
Company	£	£	£	£
HM do Brasil Ltda	792,301	–	845,808	–
Minera El Aguila SAC	–	–	–	–
HM Brazil (IOM) Ltd	4,933,377	–	4,725,314	–
Horizonte Nickel (IOM) Ltd	26,070,923	–	24,340,018	–
Araguaia Niquel Mineração Ltda	6,074,517	–	4,605,395	–
Horizonte Minerals (IOM) Ltd	253,004	–	253,004	–
Horizonte Exploration Ltd	–	413,930	–	413,930
Typhon Brasil Mineração Ltda	3,198,183	–	3,174,275	–
Total	41,322,305	413,930	37,944,114	413,930

All Group transactions were eliminated on consolidation.

On 30 November 2016 a total of 374,000,000,000 shares were issued through a private placement at a price of £0.02 per share, to raise £7,480,000 before expenses. As part of this private placement, Henderson Global Investors subscribed for 50,000,000 shares and Richard Griffiths subscribed for 62,235,000 shares representing 13.4 percent and 16.6 percent respectively of the private placement. By reason of its existing shareholdings in the Company, the participation of Henderson Global Investors and Richard Griffiths in the private placement of 30 November 2016 constituted a related party transaction under AIM Rule 13 of the AIM Rules for Companies.

On 2 December 2016 a total of 76,000,000 shares were issued through a non brokered private placement in Canada, at a price of C$0.04 per share. As part of this private placement, Teck Resources Limited subscribed for 21,517,250 shares representing 28.3 percent of the private placement. By reason of their existing shareholdings in the Company, the participation of Teck Resources Limited in the private placement each constitute a related party transaction under AIM Rule 13 of the AIM Rules for Companies.

On 27 June 2013 the Company signed an agreement for an £8 million Equity Financing Facility (‘EFF’) with Darwin Strategic Limited (‘Darwin’), a majority owned subsidiary of Henderson Global Investors’ Volantis Capital. The EFF agreement with Darwin provides Horizonte with an equity line facility which, subject to certain conditions and restrictions, can be drawn on any time over 36 months. The floor subscription price in relation to each draw down is set at the discretion of the Company. Horizonte did not utilise this facility during the period and it has now lapsed.

21 Restatements of contingent consideration and deferred tax asset

These financial statements reflect prior year adjustments in respect of a deferred tax asset, contingent consideration and associated exchange differences and finance costs. Both the deferred tax asset and contingent consideration arose from the acquisition of Teck Cominco Brasil S.A. in 2010, which was accounted for as a business combination. The initial recognition of both of these items required management to make an assessment of the probabilities of the tax losses being utilised and the fair value of the contingent consideration to be paid.

Following the recent review undertaken of the relevant recognition criteria, and conditions relating to both items it has been concluded that the level of deferred tax recognised at the time of the acquisition requires re-calculation. The recognition of the deferred tax asset at an early stage in the Araguaia project did not meet the criteria prescribed by IAS 12 – Income Taxes, of it being probable that they could be utilised.

It has also been concluded that the fair value of the contingent consideration applied at time of acquisition similarly requires re calculation. This liability relates to payments due to the vendors upon utilisation of brought forward tax losses of Teck Cominco. The payments would be 50% of the tax effect of the losses utilised from the date of acquisition up to August 2020. The fair value originally calculated assumed 100% utilisation of the brought forward tax losses and was not a probability weighted to reflect the underlying risks of the project and the requirement to utilise the losses within a set timeframe.

Management now believes that it would be appropriate to restate the Financial Statements to derecognize the deferred tax asset and re-measure the contingent consideration as follows:

1. Deferred tax asset

A deferred tax asset of £5,065,976 has been derecognised at 1 January 2015.

A deferred tax asset of £3,590,675 has been derecognised at 31 December 2015.

2. Contingent consideration and finance costs

A contingent consideration liability has been reduced to £335,327 at 1 January 2015.

Finance costs are reduced by £275,336 in the year ended 31 December 2015 in respect of reversing the unwinding of the discount on the contingent consideration.

A contingent consideration liability has been reduced to £3,161,591 at 31 December 2015.

3. Foreign exchange translation reserve

An adjustment of £1,574,535 has been made to the foreign exchange translation reserve at 1 January 2015 in respect of the above adjustments.

A further adjustment of £913,675 has been made to the foreign exchange translation reserve at 31 December 2015 in respect of further movements of the deferred tax asset and contingent consideration during 2015.

4. Retained losses

The net impact on retained losses at 1 January 2015 of the above adjustments is £2,506,533.

5. Intangible assets

An increase in carrying value of intangible exploration and evaluation assets as at 1 January 2015 of £305,253.

22 Ultimate controlling party

The Directors believe there to be no ultimate controlling party.

23 Directors’ remuneration (including Key Management)

	Aggregate emoluments	Social Security charges	Other emoluments	Share based payment charge	Pension costs	Total
Group 2016	£	£	£	£	£	£
Non-Executive Directors
Alexander Christopher	–	–	–	–	–	–
David Hall	29,000	3,312	–	24,520	–	56,832
William Fisher	29,000	–	–	24,520	–	53,520
Allan Walker	29,000	4,002	–	24,520	–	57,522
Owen Bavinton	–	–	–	24,520	32,167	56,687
Executive Directors
Jeremy Martin	170,000	31,326	59,236	67,430	17,000	344,992
Key Management
Jeffrey Karoly	128,000	13,524	9,600	61,300	15,553	227,977
Simon Retter	15,541	2,145	8,000	–	–	25,686
	400,541	54,309	76,836	165,510	64,720	823,216
	Aggregate emoluments	Social Security charges	Other emoluments	Share based payment charge	Pension costs	Total
Group 2015	£	£	£	£	£	£
Non-Executive Directors
Alexander Christopher	–	–	–	–	–	–
David Hall	33,600	–	–	4,128	–	37,728
William Fisher	24,000	–	–	4,128	–	28,128
Allan Walker	24,000	3,312	–	4,128	–	31,440
Owen Bavinton	25,608	3,534	–	4,128	–	33,270
Executive Directors
Jeremy Martin	149,000	20,562	1,950	11,353	39,104	221,969
Key Management
Jeffrey Karoly	99,000	12,672	–	10,321	48,656	170,649
	355,208	40,080	1,950	38,188	87,760	523,184

The Company does not operate a pension scheme. Pension costs comprise contributions to Defined Contribution pension plans held by the relevant Director or Key Management.

24 Employee benefit expense (including Directors and Key Management)

	Group		Company
	2016	2015	2016	2015
Group	£	£	£	£
Wages and salaries	809,954	844,343	627,155	524,501
Social security costs	134,096	198,064	49,463	47,611
Indemnity for loss of office	50,519	55,216	30,000	–
Share options granted to Directors and employees (note 17)	324,890	100,248	324,890	100,248
	1,319,459	1,197,871	1,031,508	672,360
Management	6	6	6	6
Field staff	12	26	–	–
Average number of employees including Directors and Key Management	18	32	6	6

Employee benefit expenses includes £393,712 (2015: £586,348) of costs capitalised and included within intangible non-current assets.

Share options granted include costs of £165,510 (2015: £81,883) relating to Directors.

25 Investment in subsidiaries

	2016	2015 (Restated)
Company	£	£
Shares in Group undertakings	2,348,042	2,348,042
Loans to Group undertakings	41,332,305	37,944,114
	43,670,347	40,292,156

Investments in Group undertakings are stated at cost. The loans to Group undertakings are repayable on demand and currently carry interest at 6%, however there is currently no expectation of repayment within the next twelve months and therefore loans are treated as non-current.

On 23 March 2006 the Company acquired the entire issued share capital of Horizonte Exploration Limited by means of a share for share exchange; the consideration for the acquisition was 21,841,000 ordinary shares of 1 penny each, issued at a premium of 9 pence per share. The difference between the total consideration and the assets acquired has been credited to other reserves.

26 Commitments

Operating lease commitments

The Group leases office premises under cancellable and non-cancellable operating lease agreements. The cancellable lease terms are up to one year and are renewable at the end of the lease period at market rate. The leases can be cancelled by payment of up to one month’s rental as a cancellation fee. The lease payments charged to profit or loss during the year are disclosed in note 6.

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

	2016	2015
Group	£	£
Not later than one year	11,996	46,596
Total	11,996	46,596

Capital Commitments

Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:

	2016	2015
Group	£	£
Intangible assets	–	42,100

Capital commitments relate to contractual commitments for metallurgical, economic and environmental evaluations by third parties. Once incurred these costs will be capitalised as intangible exploration asset additions.

27 Contingent Liabilities

(a) Glencore Araguaia Project

The SdT deposit area concessions are subject to on-going litigation with a Brazilian third party. Glencore has disputed these claims. The parties have agreed certain protections including the receipt by HZM from Glencore of certain indemnities in respect of such litigation.

The Asset Purchase Agreement contains customary warranties regarding the GAP project and the parties’ ability to enter into the Proposed Transaction and is subject to customary termination rights and confidentiality obligations.

(b) Other Contingencies

The Group has received a claim from various trade union organisations in Brazil regarding outstanding membership fees due in relation to various subsidiaries within the Group. Some of these claims relate to periods prior to the acquisition of the relevant subsidiary and would be covered by warranties granted by the previous owners at the date of sale. The Directors are confident that no amounts are due in relation to these proposed membership fees and that the claims will be unsuccessful. No subsequent actions, claims or communications from the various trade union organisations have been received subsequent to the requests for payment. As a result, no provision has been made in the Financial Statements for the year ended 31 December 2016 for amounts claimed. Should the claim be successful, the maximum amount payable in relation to fees not subject to the warranty agreement would be approximately £64,000.

In 2013 the Group received an infraction notice from the Brazilian Environmental Agency’s (‘IBAMA’) district office in Conceição do Araguaia in connection with carrying out drilling activities in 2011 without the relevant permits. Drilling equipment was furthermore impounded. The Group strongly believes that it operated with all necessary permits and has initiated legal proceedings to overturn the infraction notice. The Group has secured cancellation of the injunction and has appealed the associated fine and infraction notices of approximately £68,000 which has not been recognised in these financial statements.

In August 2014, the Group received a claim from a former employee in Brazil with regard to amounts allegedly due under the terms of his employment. The Group is defending the claim and it is not currently practicable to estimate the extent of any liability that may arise.

In December 2014, the Group received a writ from the State Attorney in Conceiçao do Araguaia regarding alleged environmental damages caused by drilling activities in 2011. To ensure proper environmental stewardship, the Group conducts certified baseline studies prior to all drill programmes and ensures that areas explored are properly maintained and conserved in accordance with local environmental legislation. After drilling has occurred, drill sites and access routes are rehabilitated to equal or better conditions and evidence is retained to demonstrate that such rehabilitation work has been completed. In January 2015, the Group filed a robust defence against the writ. A court hearing was held in May 2015 at which documents were requested to confirm that valid environmental authorisations were in place. These were subsequently submitted as requested. No substantive financial claim continues to be made against the Group under the terms of the writ. The Group continues to believe that the writ is flawed and is working towards having it withdrawn in due course. As a result no provision has been made in the Financial Statements for the year ended 31 December 2016.

28 Parent Company Statement of Comprehensive Income

As permitted by section 408 of the Companies Act 2006, the statement of comprehensive income of the Parent Company is not presented as part of these Financial Statements. The Parent Company’s profit for the year was £602,827 loss (2015: £421,479 profit).

29 Events after the reporting date

No significant events have occurred since the reporting date.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

For further information visit www.horizonteminerals.com.

About Horizonte Minerals:

Horizonte Minerals plc is an AIM and TSX-listed nickel development company focused in Brazil, which wholly owns the advanced Araguaia nickel laterite project located to the south of the Carajas mineral district of northern Brazil. The Company is developing Araguaia as the next major nickel mine in Brazil, with targeted production by 2019.

The Project has good infrastructure in place including rail, road, water and power.

Horizonte has a strong shareholder structure including Teck Resources Limited 17.9%, Henderson Global Investors 14.1%, Richard Griffiths 14.5%, JP Morgan 8.4%, Hargreave Hale 6.4% and Glencore 6.4%.

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, 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; 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: 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.

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
Jeremy Martin
+44 (0) 20 7763 7157

Horizonte Minerals plc
David Hall
+44 (0) 20 7763 7157
info@horizonteminerals.com
www.horizonteminerals.com

finnCap Ltd (Corporate Broking)
Emily Morris
+44 (0) 20 7220 0500

finnCap Ltd (Corporate Finance)
Christopher Raggett
+44 (0) 20 7220 0500

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James Thompson
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Anthony Adams
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Shard Capital (Joint Broker)
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+44 (0) 20 7186 9952

Shard Capital (Joint Broker)
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