REG - Horizonte Minerals - Final Results <Origin Href="QuoteRef">HZM.L</Origin> - Part 2
15/03/2016 07:07
- Part 2: For the preceding part double click ID:nRSO0590Sa
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.
In principle, 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 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.
2.15 Contingent consideration
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 has been
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.
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 Contingent Liabilities
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 UK pound.
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 2015, if the US Dollar had weakened/strengthened by 20% against
Pound Sterling and Brazilian Real with all other variables held constant, post
tax loss for the year would have been approximately £12,820/£19,230
lower/higher mainly as a result of foreign exchange losses/gains on
translation of US Dollar 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
The Group is exposed to commodity price risk as a result of its operations.
However, 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. The Group's listed equity securities are
susceptible to price risk arising from uncertainties about future values of
the securities.
(e) Credit risk
Credit risk arises from cash and cash equivalents as well as exposure to joint
venture partners including 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. Management does not
expect any losses from non-performance by joint venture partners.
No debt finance has been utilised and if required this is subject to
pre-approval by the Board of Directors. The amount of exposure to any
individual counter party is subject to a limit, which is assessed by the
Board.
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 2015 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
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 2015 of
£19,854,074 (2014: £20,499,389). Management tests annually whether exploration
projects have future economic value in accordance with the accounting policy
stated in note 2.7. Each exploration project is subject to an annual review by
either a consultant or senior company geologist to determine if the
exploration results returned to date warrant further exploration expenditure
and have the potential to result in an economic discovery. This review takes
into consideration long-term metal prices, anticipated resource volumes and
grades, permitting and infrastructure. In the event that a project does not
represent an economic exploration target and results indicate there is no
additional upside, a decision will be made to discontinue exploration. The
Directors have reviewed the estimated value of each project prepared by
management and do not consider any impairment is necessary.
4.2 Estimated impairment of goodwill
Goodwill has a carrying value at 31 December 2015 of £192,028 (2014:
£270,923). 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 £5,171,629, at 31 December
2015 (2014: £2,235,512). Following the purchase of the Vale dos Sonhos mineral
concession from Xstrata Brasil Brasil Mineração Ltda in November 2015 (refer
note 19) there are two contingent consideration arrangements in place as at 31
December 2015:
· 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 on 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.
· 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 fair value of these potential considerations have been determined using
the operating and financial assumptions in the cash flow model derived from
the Pre-Feasibility Study published by the Group in March 2014 in order to
calculate the ability to utilise the acquired tax losses, together with the
timing of their utilisation. 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 upward or downward movements in several factors to include
commodity prices, operating costs, capital expenditure, production levels,
grades, recoveries and interest rates. Commercial production is assumed to
commence in 2019.
If the estimated discount rate of 7% used in determining the fair value of
contingent consideration payable to Teck Cominco Brasil S.A. and Xstrata
Brasil Mineraçâo Ltda was 2% higher, then Management's estimates of the amount
payable would decrease by £181,098 and £184,870, respectively. If the
discount rate was 2% lower, the amount payable would increase by £200,176 and
£202,995.
The carrying value of contingent consideration would not be affected were the
operating cash flows to vary by as much as 50% from management's estimates.
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 has been recognised on acquisition of
Araguaia Niquel Mineração Ltda for the utilisation of the available tax losses
acquired. Should the actual final outcome regarding the utilisation of these
losses be different from management's estimations, the Group may need to
revise the carrying value of this asset.
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.
2015 UK Brazil Other Total
2015 2015 2015 2015
£ £ £ £
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)
Inter segment revenues - 872,643 - 872,643
Depreciation charges (1,037) (382) - (1,419)
Additions to non-current assets - (645,313) - (645,313)
Reportable segment assets 2,687,317 23,741,165 - 26,428,482
Reportable segment liabilities 5,260,018 1,621,212 - 6,881,230
2014 UK Brazil Other Total
2014 2014 2014 2014
£ £ £ £
Administrative expenses (848,454) (456,832) (6,402) (1,311,688)
Profit/(loss) on foreign exchange 39,089 (85,453) - (46,364)
Project and intangible fixed asset impairment - (31,989) - (31,989)
Loss from operations per reportable segment (809,365) (574,274) (6,402) (1,390,041)
Inter segment revenues - 677,635 - 677,635
Depreciation charges (2,846) (820) - (3,666)
Additions to non-current assets - (2,018,658) - (2,018,658)
Reportable segment assets 4,349,901 26,594,454 - 30,944,355
Reportable segment liabilities 2,348,686 2,424,498 - 4,773,184
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:
2015£ 2014
£
Loss from operations per reportable segment (1,116,301) (1,390,041)
Changes in fair value of contingent consideration (refer note 19) 138,515 415,702
Charge for share options granted (100,248) (125,107)
Impairment of available-for-sale asset (253,006) -
Finance income 14,918 31,413
Finance costs (338,430) (173,903)
Loss for the year from continuing operations (1,654,552) (1,241,936)
6 Expenses by nature
2015 2014
Group £ £
Staff costs 456,255 680,080
Indemnity for loss of office 55,019 29,227
Exploration related costs expensed (excluding staff costs) 43,945 166,866
Charge for share options granted 100,248 125,107
Depreciation (note 11) 1,419 3,666
Loss on foreign exchange 251,409 46,364
Change in fair value of contingent consideration (138,515) (415,702)
Impairments of intangible fixed assets - 31,989
Impairment of available-for-sale financial asset 253,006 -
Operating lease charges 95,182 64,153
Profit on disposal of property, plant and equipment (24,453) -
Other expenses 237,525 367,696
Total operating expenses 1,331,040 1,099,446
Project and fixed asset impairment costs in 2014 of £31,989 consist of the
impairment charge on intangible assets attributable to the Rio Maria project.
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 2015 2014
£ £
Fees payable to the Company's auditor and its associates for the audit of the parent company and consolidated financial statements 37,500 30,000
Fees payable to the Company's auditor and its associates for other services:
- Audit related assurance services 7,000 4,525
-Tax compliance services 1,900 2,380
8 Finance income and costs
Group 2015 2014
£ £
Finance income:
- Interest income on cash and short-term bank deposits 14,918 31,413
Finance costs:
- Contingent consideration: unwinding of discount (338,430) (173,903)
Net finance costs (323,512) (142,490)
9 Income Tax
Group 2015 2014
£ £
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 2015 2014
£ £
Loss before income tax (1,654,552) (1,241,936)
Current tax at 32.52% (2014: 23.1%) (538,060) (330,757)
Effects of:
Expenses not deducted for tax purposes 82,043 62,451
Utilisation of tax losses brought forward (150,480) -
Tax losses carried forward for which no deferred income tax asset was recognised - UK - 131,940
Tax losses carried forward for which no deferred income tax asset was recognised - Brazil 606,497 136,366
Total tax - -
No tax charge or credit arises on the loss for the year.
The weighted average applicable tax rate of 32.52% used is a combination of
the 21.5% effective standard rate of corporation tax in the UK, 34% Brazilian
corporation tax and 30% Peruvian corporation tax. The weighted average
applicable tax rate has increased from 23.1% to 32.52% as a greater proportion
of loss before income tax arose in Brazil.
Deferred income tax
An analysis of deferred tax assets and liabilities is set out below.
Group 2015 2014
£ £
Deferred tax assets
- Deferred tax asset to be recovered after more than 12 months 3,590,675 5,065,976
3,590,675 5,065,976
Deferred tax liabilities
- Deferred tax liability to be settled after more than 12 months (1,560,581) (2,201,778)
(1,560,581) (2,201,778)
Deferred tax asset (net) 2,030,094 2,864,198
The gross movement on the deferred income tax account is as follows:
Group 2015 2014
£ £
At 1 January 2,864,198 3,038,142
Exchange differences (834,104) (173,944)
At 31 December 2,030,094 2,864,198
The movement in deferred income tax assets and liabilities during the year,
without taking into consideration the offsetting of balances within the same
tax jurisdiction, is as follows:
Group Deferred tax Deferred tax Total
liabilities assets £
Fair value gains Tax Losses
£ £
At 1 January 2014 (2,335,492) 5,373,634 3,038,142
Exchange differences 133,714 (307,658) (173,944)
At 31 December 2014 (2,201,778) 5,065,976 2,864,198
Exchange differences 641,197 (1,475,301) (834,104)
At 31 December 2015 (1,560,581) 3,590,675 2,030,094
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.
The Group has tax losses of approximately £17,363,000 (2014: £18,190,000) in
Brazil and excess management charges of approximately £1,690,000 (2014:
£2,590,000) in the UK available to carry forward against future taxable
profits. With the exception of the deferred tax asset arising on acquisition
of Araguaia Niquel Mineração Ltda (formerly Teck Cominco Brasil S.A.) in 2011,
no deferred tax asset has been recognised in respect of tax losses because of
uncertainty over the timing of future taxable profits against which the losses
may be offset.
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 ExplorationLicenses Exploration and Total
£ £ evaluation costs £
£
Cost
At 1 January 2014 287,378 - 19,754,559 20,041,937
Additions - - 2,018,658 2,018,658
Impairments - - (31,989) (31,989)
Exchange rate movements (16,453) - (1,241,841) (1,258,294)
At 31 December 2014 270,925 - 20,499,387 20,770,312
Additions - 3,174,275 2,540,833 5,715,108
Exchange rate movements (78,897) - (6,360,421) (6,439,318)
Net book amount at 31 December 2015 192,028 3,174,275 16,679,799 20,046,102
Impairment charges in 2014 of £31,989 were included in profit or loss as the
intangible assets attributable to the Rio Maria project were written off.
(a) Exploration and evaluation assets
Impairment reviews for exploration and evaluation assets are carried out
either on a project by project basis or by geographical area. The Group's
exploration and evaluation projects are at various stages of exploration and
development and are therefore subject to a variety of valuation techniques.
An operating segment-level summary of exploration licenses, exploration and
evaluation assets is presented below:
Group 2015 2014
£ £
Brazil - Araguaia/Lontra/Vila Oito and Floresta 16,679,799 20,499,387
Brazil - Vale dos Sonhos (refer note 28) 3,174,275 -
19,854,074 20,499,387
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.
In March 2014 a Canadian NI 43-101 compliant Pre-Feasibility Study ('PFS') was
published by the Company regarding the Araguaia Project. 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, which is still relevant and applicable
throughout 2015, and judged that no impairment was required with regards to
the Araguaia Project.
Sensitivity to changes in assumptions
For the base case NPV8 of the Araguaia Project of US$519 million as per the
PFS to be reduced to the book value of the Araguaia Project as at 31 December
2015, the discount rate applied to the cash flow model would need to be
increased from 8% to 20%.
Other early stage exploration projects in Brazil are at an early stage of
development and no JORC/Canadian NI 43-101 or non-JORC/ Canadian NI 43-101
compliant resource estimates are available to enable value in use calculations
to be prepared. The Directors therefore undertook an assessment of the
following areas and circumstances which could indicate impairment:
> The Group's right to explore in an area has expired, or will expire
in the near future without renewal.
> No further exploration or evaluation is planned or budgeted for,
whether by the Company directly or through a joint venture agreement.
> A decision has been taken by the Board to discontinue exploration
and evaluation in an area due to the absence of a commercial level of
reserves.
> Sufficient data exists to indicate that the book value will not be
fully recovered from future development and production.
(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.
11 Property, plant and equipment
Group Vehicles and Office Total
other field equipment £
equipment £
£
Cost
At 1 January 2014 161,070 15,175 176,245
Foreign exchange movements (8,981) (445) (9,426)
At 31 December 2014 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
Accumulated depreciation
At 1 January 2014 63,761 5,033 68,794
Charge for the year 46,452 3,475 49,927
Foreign exchange movements (6,096) (196) (6,292)
At 31 December 2014 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
Net book amount as at 31 December 2015 9,008 2,880 11,888
Net book amount as at 31 December 2014 47,972 6,418 54,390
Depreciation charges of £27,295 (2014: £46,261) 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 2015
of £1,419 (2014: £3,666) has been charged in 'administrative expenses' under
'Depreciation.'
Vehicles and other field equipment include the following amounts used to
perform exploration activities:
2015 2014
£ £
Cost 74,647 152,089
Accumulated depreciation (65,639) (104,117)
Net book amount 9,008 47,972
Company Field Office Total
equipment equipment £
£ £
Cost
At 1 January 2014 4,208 7,403 11,611
Additions - - -
At 31 December 2014 and 2015 4,208 7,403 11,611
Accumulated depreciation
At 1 January 2014 2,894 3,580 6,474
Charge for the year 1,314 1,532 2,846
At 31 December 2014 4,208 5,112 9,320
Charge for the year - 1,037 1,037
At 31 December 2015 4,208 6,149 10,357
Net book amount as at 31 December 2015 - 1,254 1,254
Net book amount as at 31 December 2014 - 2,291 2,291
12 Trade and other receivables
Group Company
2015 2014 2015 2014
£ £ £ £
Other receivables 40,912 22,709 18,739 13,818
Current portion 40,912 22,709 18,739 13,818
Trade and other receivables are all due within one year. The fair value of all
receivables is the same as their carrying values stated above.
The carrying amounts of the Group and Company's trade and other receivables
are denominated in the following currencies:
Group Company
2015 2014 2015 2014
£ £ £ £
Brazilian Real 22,173 4,922 - -
UK Pound 18,739 17,787 18,739 13,818
40,912 22,709 18,739 13,818
As of 31 December 2015 the Group's and Company's other receivables of £40,912
(2014: £22,709) were fully performing.
The maximum exposure to credit risk at the reporting date is the carrying
value of each class of receivable mentioned above. The Group and Company do
not hold any collateral as security.
13 Available-for-sale financial assets
The Group had investments in equity shares as at 31 December 2015. Following
assessment by the Directors of the Company, these shares have been fully
impairment to £nil. The fair value of the investments is £nil as at 31
December 2014 and 2015.
14 Cash and cash equivalents
Group Company
2015 2014 2015 2014
£ £ £ £
Cash at bank and on hand 2,676,160 4,982,219 2,519,018 4,160,235
Short-term deposits 62,745 48,749 49,248 48,749
2,738,905 5,030,968 2,568,266 4,208,984
The Group's cash at bank and short-term deposits are held with institutions
with the following credit ratings (Fitch):
Group Company
2015 2014 2015 2014
£ £ £ £
A 2,616,981 4,280,358 2,519,018 4,160,235
BBB- 121,924 750,610 49,248 48,749
2,738,905 5,030,968 2,568,266 4,208,984
15 Share capital
Group and Company 2015 2015 2014 2014
Number £ Number £
Issued and fully paid
Ordinary shares of 1p each
At 1 January 492,427,105 4,924,271 401,139,497 4,011,395
Issue of ordinary shares 178,777,273 1,787,773 91,287,608 912,876
At 31 December 671,204,378 6,712,044 492,427,105 4,924,271
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.
16 Share premium
Group and Company 2015 2014
£ £
At 1 January 31,095,370 26,997,998
Premium arising on issue of ordinary shares 200,300 4,564,389
Issue costs (42,962) (467,017)
At 31 December 31,252,708 31,095,370
17 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. 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 Weighted Number of Weighted
options average options average
2015 exercise 2014 exercise
£ price £ price
2015 2014
£ £
Outstanding at 1 January 38,300,000 0.119 25,860,000 0.148
Forfeited (2,790,000) 0.151 (2,010,000) 0.151
Granted 13,250,000 0.04 14,450,000 0.073
Outstanding at 31 December 48,760,000 0.096 38,300,000 0.119
Exercisable at 31 December 30,693,333 0.124 23,850,000 0.148
The options outstanding at 31 December 2015 had a weighted average remaining
contractual life of 7.45 years (2014: 7.53 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 2015 2014
options options
Date of grant or reissue 10/06/2015 09/05/2014
Weighted average share price 2.63 pence 6.42 pence
Weighted average exercise price 4.00 pence 7.25 pence
Expiry date 09/06/2025 09/05/2024
Options granted 13,250,000 14,450,000
Volatility 17.3% 17.3%
Dividend yield Nil Nil
Option life 10 years 10 years
Annual risk free interest rate 2.83% 2.83%
Forfeiture discount - -
Marketability discount 5% 5%
Total fair value of options granted £54,700 £256,786
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 (£) 2015 2015 2015 2015 2014 2014 2014 2014
Weighted Number of Weighted Weighted Weighted Number of Weighted Weighted
average shares average average average shares average average
exercise price remaining life remaining life exercise price remaining life remaining life
(£) expected contracted (£) expected contracted
(years) (years) (years) (years)
0-0.1 0.060 30,300,000 8.62 8.62 0.076 17,200,000 8.65 8.65
0.1-0.2 0.154 18,460,000 5.53 5.53 0.154 21,100,000 6.63 6.63
18 Other reserves
Available-for-sale Merger Translation Other
reserve reserve reserve reserve Total
Group £ £ £ £ £
At 1 January 2014 (230,276) 10,888,760 (8,470,834) (1,048,100) 1,139,550
Other comprehensive income (22,730) - - - (22,730)
Currency translation differences - - (1,438,421) - (1,438,421)
At 31 December 2014 (253,006) 10,888,760 (9,909,255) (1,048,100) (321,601)
Other comprehensive income 253,006 - - - 253,006
Currency translation differences - - (7,267,732) - (7,267,732)
At 31 December 2015 - 10,888,760 (17,176,987) (1,048,100) (7,336,327)
Company Merger Total
reserve £
£
At 1 January 2014 and 31 December 2014 10,888,760 10,888,760
At 1 January 2015 and 31 December 2015 10,888,760 10,888,760
The merger and other reserve as at 31 December 2015 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 2.8c). Movements in the translation reserve are linked to the
changes in the value of the Brazilian Real against Sterling: the intangible
assets of the Group are located in Brazil, and their functional currency is
the Brazilian Real, which decreased in value against Sterling in both 2014 and
2015.
19 Trade and other payables
Group Company
2015 2014 2015 2014
£ £ £ £
Non-current
Contingent consideration payable to former owners of Teck Cominco Brasil S.A. 2,364,751 2,235,512 2,364,751 2,235,512
Contingent consideration payable to Xstrata Brasil Mineração Ltda (refer note 27) 2,806,878 - 2,806,878 -
Total contingent consideration 5,171,629 2,235,512 5,171,629 2,235,512
Current
Trade and other payables 16,038 28,380 10,377 3,239
Amounts due to related parties (refer note 22) - - 413,930 413,930
Social security and other taxes 21,519 27,303 15,533 15,040
Accrued expenses 111,463 280,211 63,033 69,951
149,020 335,894 502,873 502,160
Total trade and other payables 5,320,649 2,571,406 5,674,502 2,737,672
Trade and other payables include amounts due of £65,748 (2014: £204,066) 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 potential contingent consideration arrangement with the
former owners of Teck Cominco Brasil S.A. was estimated at the acquisition
date according to when future taxable profits against which the tax losses may
be utilised were anticipated to arise. The fair value estimates were based on
the current rates of tax on profits in Brazil of 34%. A discount factor of
7.0% was applied to the future dates at which the tax losses will be utilised
and consideration paid.
As at 31 December 2015, there was a finance expense of £323,925 (2014:
£173,903) 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.
The cash flow model used to estimate the contingent consideration was
adjusted, to take into account changed assumptions in the timing of cash flows
as derived from the Pre-Feasibility Study as published by the Group in March
2014. The key assumptions underlying the cash flow model are unchanged as at
31 December 2014, other than during 2015 the assumed date for commencement of
commercial production was revised from 2017 to 2019. The change in the fair
value of contingent consideration payable to the former owners of Teck Cominco
Brasil S.A. generated a credit to profit or loss of £194,686 for the year
ended 31 December 2015 (2014: £415,072) due to exchange rate changes in
Management's assumptions and in the functional currency in which the liability
is payable.
Contingent Consideration payable to Xstrata Brasil Mineração Ltda
The contingent consideration payable to Xstrata Brasil Mineração Ltda
comprises two elements: USD$330,000 due after the date of issuance of a joint
feasibility study for the combined Enlarged Project areas, together with
US$5,000,000 consideration as at the date of first commercial production from
any of the resource areas within the Enlarged Project area. The key
assumptions underlying the treatment of the contingent consideration the
US$5,000,000 are as per those applied to the contingent consideration payable
to the former owners of Teck Cominco Brasil S.A.
As at 31 December 2015, there was a finance expense of £14,505 (2014: £nil)
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.
20 Dividends
No dividend has been declared or paid by the Company during the year ended 31
December 2015 (2014: nil).
21 Earnings per share
(a) Basic
The basic earnings per share of 0.311p loss per share (2014 loss per share:
0.283p) 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.
2015 2014
Group £ £
Loss attributable to owners of the parent (1,654,552) (1,241,936)
Weighted average number of ordinary shares in issue 531,868,151 439,259,597
(b) Diluted
The basic and diluted earnings per share for the years ended 31 December 2015
and 31 December 2014 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 17.
22 Related party transactions
The following transactions took place with subsidiaries in the year:
A fee totalling £232,829 (2014: £202,045) was charged to HM do Brazil Ltda and
£639,814 (2014: £475,589) to Araguaia Niquel Mineração Ltda by Horizonte
Minerals Plc in respect of consultancy services provided and funding costs.
Amounts totalling £4,919,360 (2014: £2,076,925) 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 2015, by Horizonte Minerals
Plc. Interest is charged at an annual rate of 4% on balances outstanding
during the year.
Balances with subsidiaries at the year end were:
2015 2015 2014 2014
Assets Liabilities Assets Liabilities
Company £ £ £ £
HM do Brasil Ltda 845,808 - 274,678 -
Minera El Aguila SAC - - 3,848 -
HM Brazil (IOM) Ltd 4,725,314 - 4,493,680 -
Horizonte Nickel (IOM) Ltd 28,747,037 - 26,916,381 -
Araguaia Niquel Mineração Ltda 4,605,395 - 3,478,592 -
Horizonte Minerals (IOM) Ltd 253,004 - 253,004 -
Horizonte Exploration Ltd - 413,930 - 413,930
Typhon Brasil Mineração Ltda 3,174,275 - - -
Total 42,350,833 413,930 35,420,183 413,930
All Group transactions were eliminated on consolidation.
On 2 October 2015 a total of 112,500,000 shares were issued through the first
tranche of a private placement at a price of £0.01 per share, to raise
£1,125,000 before expenses. As part of this private placement, Henderson
Global Investors subscribed for 45,000,000 shares representing 40 percent of
the first tranche of the private placement. By reason of its existing
shareholdings in the Company, the participation of Henderson Global Investors
in the private placement of 2 October 2015 constituted a related party
transaction under AIM Rule 13 of the AIM Rules for Companies.
On 9 October 2015 a total of 42,500,000 shares were issued through the second
and final tranche of a private placement at a price of £0.01 per share, to
raise £425,000 before expenses. Mr Richard Griffiths subscribed for 45,500,000
shares representing 100 percent of the second tranche of the private
placement. By reason of his existing shareholdings in the Company, the
participation of Mr Griffiths in the second tranche of the private placement
of 9 October 2015 constituted a related party transaction under AIM Rule 13 of
the AIM Rules for Companies.
On 31 July 2014 a total of 50,000,000 shares were issued through a public
offering in Canada, at a price of CAD 0.11 per share and a private placement
was closed for a total of 41,287,608 shares, at a price of £0.06 per share, to
raise £5,447,265 before expenses. As part of this private placement, Teck
Resources Limited subscribed for 18,115,942 shares representing 43.9 percent
of the private placement and Henderson Global Investors subscribed for
8,333,333 shares, representing 20.2 percent of the private placement. By
reason of their existing shareholdings in the Company, the participation of
Teck Resources Limited and Henderson Global Investors 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 is under no obligation
to make a draw down and there are no penalty fees if the Company does not use
the facility.
23 Ultimate controlling party
The Directors believe there to be no ultimate controlling party.
24 Directors' remuneration (including key management)
Aggregate Other Pension
emoluments emoluments costs Total
Group 2015 £ £ £ £
Non-Executive Directors
Alexander Christopher - - - -
David Hall 33,600 - - 33,600
William Fisher 24,000 - - 24,000
Allan Walker 24,000 - - 24,000
Owen Bavinton 25,608 -
- More to follow, for following part double click ID:nRSO0590ScRecent news on Horizonte Minerals
See all newsREG - AIM Horizonte Minerals - Cancellation - Horizonte Minerals Plc
AnnouncementREG - Horizonte Minerals - Appointment of Administrators
AnnouncementREG - AIM Horizonte Minerals - Suspension - Horizonte Minerals Plc
AnnouncementREG - Horizonte Minerals - Notice of resolution to appoint administrators
AnnouncementREG - Horizonte Minerals - Corporate Update
Announcement