REG - Horizonte Minerals - Interim Financial Results
17/08/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230817:nRSQ5626Ja&default-theme=true
RNS Number : 5626J Horizonte Minerals PLC 17 August 2023
NEWS RELEASE
17 August 2023
INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
Horizonte Minerals Plc (AIM/TSX: HZM) ("Horizonte" or the "Company"), a nickel
company developing two Tier 1 assets in Brazil, announces it has today
published its unaudited financial results for the six-month period to 30 June
2023.
Highlights of the period, as per the announcement on 3 August 2023:
· Araguaia Nickel Project Line 1 construction activities continued to
make good progress with first metal production on-schedule for Q1 2024
o Strong safety performance, no lost time injuries with close to 3.8 million
hours worked
o Approximately 65% of the overall construction of Araguaia was completed as
of 30 June 2023, with physical site construction 53% complete
o Several major milestones were achieved during the period including the
delivery of the Rotary Kiln and commencement of ore mining
o US$329 million has been spent on the Araguaia construction out of the
budgeted capital requirement of US$537 million
· Araguaia Nickel Project Line 2 Feasibility Study ("FS"), which aims
to double nickel production from 14,500 tonnes per annum to 29,000 tonnes per
annum, to be published later this year
· Liquidity and funding sources of US$344 million as of 30 June 2023
· Published fourth consecutive standalone Sustainability Report for
2022
· A recent video of the project progress is available:
https://horizonteminerals.com/uk/en/videos_and_audio/
(https://horizonteminerals.com/uk/en/videos_and_audio/)
This announcement has been posted on the Company's website
www.horizonteminerals.com (http://www.horizonteminerals.com) and is also
available on SEDAR at www.sedar.com
(file:///C:/Users/cath.drummond/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/BMJLMA13/www.sedar.com)
.
For further information, visit www.horizonteminerals.com
(http://www.horizonteminerals.com) or contact:
Horizonte Minerals plc info@horizonteminerals.com (mailto:info@horizonteminerals.com)
Jeremy Martin (CEO) +44 (0) 203 356 2901
Simon Retter (CFO)
Patrick Chambers (Head of IR)
Peel Hunt LLP (Nominated Adviser & Joint Broker) +44 (0)20 7418 8900
Ross Allister
David McKeown
BMO (Joint Broker) +44 (0)20 7236 1010
Thomas Rider
Pascal Lussier Duquette
Andrew Cameron
Barclays (Joint Broker) +44 (0)20 7623 2323
Philip Lindop
Richard Bassingthwaighte
Tavistock (Financial PR) +44 (0) 20 7920 3150
Emily Moss
Cath Drummond
ABOUT HORIZONTE MINERALS
Horizonte Minerals Plc (AIM/TSX: HZM) is developing two 100%-owned, Tier 1
projects in Pará state, Brazil - the Araguaia Nickel Project and the Vermelho
Nickel-Cobalt Project. Both projects are high-grade, low-cost, with low carbon
emission intensities and are scalable. Araguaia is under construction with
first metal scheduled for 1Q 2024. When fully ramped up with Line 1 and Line
2, Araguaia is forecast to produce 29,000 tonnes of nickel per year. Vermelho
is at feasibility study stage and is expected to supply nickel to the critical
metals market. Horizonte's combined production profile of over 60,000 tonnes
of nickel per year positions the Company as a globally significant nickel
producer. Horizonte's top three shareholders are La Mancha Investments S.à
r.l., Glencore Plc and Orion Resource Partners LLP.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Except for statements of historical fact relating to the Company, certain
information contained in this press release constitutes "forward-looking
information" under Canadian securities legislation. Forward-looking
information includes, but is not limited to, the ability of the Company to
complete any planned acquisition of equipment, statements with respect to the
potential of the Company's current or future property mineral projects; the
ability of the Company to complete a positive feasibility study regarding the
second RKEF line at Araguaia on time, or at all, the ability of the Company to
complete a positive feasibility study regarding the Vermelho Project on time,
or at all, the success of exploration and mining activities; cost and timing
of future exploration, production and development; the costs and timing for
delivery of the equipment to be purchased, the estimation of mineral resources
and reserves and the ability of the Company to achieve its goals in respect of
growing its mineral resources; the realization of mineral resource and reserve
estimates and achieving production in accordance with the Company's potential
production profile or at all. Generally, forward-looking information can be
identified by the use of forward-looking terminology such as "plans",
"expects" or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not anticipate",
or "believes", or variations of such words and phrases or statements that
certain actions, events or results "may", "could", "would", "might" or "will
be taken", "occur" or "be achieved". Forward-looking information is based on
the reasonable assumptions, estimates, analysis and opinions of management
made in light of its experience and its perception of trends, current
conditions and expected developments, as well as other factors that management
believes to be relevant and reasonable in the circumstances at the date that
such statements are made, and are inherently subject to known and unknown
risks, uncertainties and other factors that may cause the actual results,
level of activity, performance or achievements of the Company to be materially
different from those expressed or implied by such forward-looking information,
including but not limited to risks related to: the inability of the Company to
complete any planned acquisition of equipment on time or at all, the ability
of the Company to complete a positive feasibility study regarding the
implementation of a second RKEF line at Araguaia on the timeline contemplated
or at all, the ability of the Company to complete a positive feasibility study
regarding the Vermelho Project on the timeline contemplated or at all,
exploration and mining risks, competition from competitors with greater
capital; the Company's lack of experience with respect to development-stage
mining operations; fluctuations in metal prices; uninsured risks;
environmental and other regulatory requirements; exploration, mining and other
licences; the Company's future payment obligations; potential disputes with
respect to the Company's title to, and the area of, its mining concessions;
the Company's dependence on its ability to obtain sufficient financing in the
future; the Company's dependence on its relationships with third parties; the
Company's joint ventures; the potential of currency fluctuations and political
or economic instability in countries in which the Company operates; currency
exchange fluctuations; the Company's ability to manage its growth effectively;
the trading market for the ordinary shares of the Company; uncertainty with
respect to the Company's plans to continue to develop its operations and new
projects; the Company's dependence on key personnel; possible conflicts of
interest of directors and officers of the Company, and various risks
associated with the legal and regulatory framework within which the Company
operates, together with the risks identified and disclosed in the Company's
disclosure record available on the Company's profile on SEDAR at
www.sedar.com, including without limitation, the annual information form of
the Company for the year ended December 31, 2022, and the Araguaia and
Vermelho Technical Reports available on the Company's website
https://horizonteminerals.com/. 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
Unaudited Condensed Consolidated Interim Financial Statements for the six
months ended 30 June 2023
Condensed Consolidated Statement of Comprehensive Income
6 months ended
30 June
2023 2022
Unaudited Unaudited
Amended (Note 2)
Notes US$'000 US$'000
Administrative expenses (10,453) (7,326)
Share based payments 11 (1,196) -
Gain/(loss) on foreign exchange 10,987 9,383
(Loss)/profit before interest and taxation (662) 2,057
Net finance (costs)/income 5 (2,144) (2,984)
Loss before taxation (2,807) (927)
Taxation - -
Loss for the period (2,807) (927)
Other comprehensive income items that may be reclassified subsequently to
profit or loss
Cash flow hedges - foreign forward contracts 9 9,291 (4,638)
Currency translation differences on translating foreign operations 28,019 (9,789)
37,310 (14,427)
Other comprehensive income / (loss) for the period, net of taxation
Total comprehensive income / (loss) for the period attributable to equity 34,503 (15,354)
holders of the Company
Earnings per share attributable to the equity holders of the Group
Basic & Diluted earnings per share (pence per share) 20 (1.045) (0.487)
Condensed Consolidated Statement of Financial Position
30 June 31 December
2023 2022
Unaudited Audited
Notes US$'000 US$'000
Assets
Non-current assets
Intangible assets 6 19,714 13,209
Property, plant & equipment 7 449,880 277,902
Right of use assets 1,033 958
Trade and other receivables 21,015 9,966
Derivative financial assets 9 - 62
491,642 302,097
Current assets
Trade and other receivables 36,253 48,774
Derivative financial asset 9, 13b 25,220 15,342
Cash and cash equivalents 8 138,682 154,028
200,155 218,144
Total assets 691,797 520,241
Equity and liabilities
Equity attributable to owners of the parent
Issued capital 10 70,423 70,333
Share premium 10 306,946 306,720
Other reserves (1,919) (29,938)
Cash flow hedge reserve 10,379 1,088
Share options reserve 11 2,612 1,416
Accumulated losses (52,994) (50,188)
Total equity 335,446 299,430
Liabilities
Non-current liabilities
Contingent consideration 12 7,131 6,896
Royalty Finance 13a 96,661 89,745
Deferred consideration 12 3,815 4,808
Convertible loan notes liability 14 64,123 59,448
Cost overrun facility 15 23,872 23,810
Senior debt facility 16 128,317 4,328
Environmental rehabilitation provision 1,158 635
Lease liabilities 669 715
Trade and other payables 363 723
326,109 191,109
Current liabilities
Trade and other payables 28,760 28,481
Deferred consideration 12 1,061 950
Lease liabilities 421 272
30,242 29,703
Total liabilities 356,351 220,811
Total equity and liabilities 691,797 520,241
Condensed Statement of Changes in Shareholders' Equity
Attributable to the owners of the parent
Share Share Accumulated Other Cash flow hedge reserve US$'000 Share options reserve US$'000
capital premium losses reserves Total
US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2022 52,215 245,388 (45,078) (23,273) - - 229,253
Comprehensive income
Loss for the period - - (927) - - - (927)
Other comprehensive income
Cash flow hedges - foreign forward contracts - - - - (4,638) - (4,638)
Currency translation differences - - - (9,789) - - (9,789)
Total comprehensive loss - - (927) (9,789) (4,638) - (15,354)
Transactions with owners
Issue of ordinary shares 78 261 198 - - - 537
Total transactions with owners 78 261 198 - - - 537
As at 30 June 2022 (amended note 2 and unaudited) 52,293 245,649 (45,807) (33,062) (4,638) - 214,436
Attributable to the owners of the parent
Share Share Accumulated Other Cash flow hedge reserve US$'000 Share options reserve US$'000
capital premium losses reserves Total
US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2023 70,333 306,720 (50,188) (29,938) 1,088 1,416 299,430
Comprehensive income
Loss for the period - - (2,807) - - - (2,807)
Other comprehensive income
Cash flow hedges - foreign forward contracts - - - - 9,291 - 9,291
Currency translation differences - - - 28,019 - - 28,019
Total comprehensive income / (loss) - - (2,807) 28,019 9,291 - 34,503
Transactions with owners
Issue of ordinary shares 90 226 - - - - 316
Share options granted - - - - - 1,196 1,196
Total transactions with owners 90 226 - - - 1,196 1,512
As at 30 June 2023 (unaudited) 70,423 306,946 (52,995) (1,919) 10,379 2,612 335,446
Condensed Consolidated Statement of Cash Flows
6 months ended
30 June
2023 2022
Amended (Note 2)
Unaudited Unaudited
US$'000 US$'000
Cash flows from operating activities
Loss before taxation (2,807) (927)
Net finance costs 5 2,144 2,984
Share based payment 11 1,196 -
Exchange differences (10,987) (9,383)
Operating loss before changes in working capital (10,453) (7,326)
Decrease/(increase) in trade and other receivables (16,799) (3,057)
(Decrease)/increase in trade and other payables (80) (11,841)
Net cash outflow from operating activities (27,332) (22,224)
Cash flows from investing activities
Purchase of intangible assets 6 (5,396) (639)
Purchase of property, plant and equipment 7 (140,178) (67,047)
Interest received 5 4,368 2,394
Net cash outflow from investing activities (141,205) (65,292)
Cash flows from financing activities
Net proceeds from issue of ordinary shares 10 317 537
Proceeds from issue of convertible loan notes 14 - 61,263
Issue costs 14 - (950)
Proceeds from royalty finance arrangement 13a - 25,000
Issue costs 13a - (848)
Proceeds from senior debt facility 16 135,000 -
Lease liability payments (222) -
Commitment fees payments (4,219) -
Loan facilities interest payments 15,16 (2,024) -
Net cash inflow from financing activities 128,852 85,001
Net decrease in cash and cash equivalents (39,685) (2,515)
Cash and cash equivalents at beginning of period 154,028 210,492
Exchange gain/(loss) on cash and cash equivalents 24,340 (9,021)
Cash and cash equivalents at end of the period 138,682 198,956
Extract from the Notes to the Financial Statements*
*The notes below are only an extract from the Unaudited Condensed Consolidated
Interim Financial Statements as at 30 June 2023. For the full disclosure
please refer to the interim results published on our website
General information
The principal activity of the Company and its subsidiaries (together 'the
Group') is the exploration and development of base metals. There is no
seasonality or cyclicality of the Group's operations.
The Company's shares are listed on the Alternative Investment Market of the
London Stock Exchange (AIM) and on the Toronto Stock Exchange (TSX). The
Company is incorporated and domiciled in the United Kingdom. The address of
its registered office is Rex House, 4-12 Regent Street, London SW1Y 4RG.
Basis of preparation
The financial statements for the year ended 31 December 2022 were prepared in
accordance with UK adopted international accounting standards. The financial
statements were prepared under the historical cost convention except for the
following items (refer to individual accounting policies for details):
· Contingent consideration
· Financial instruments - fair value through profit and loss
· Cash settled share-based payment liabilities
· Cash flow hedges at fair value through other comprehensive income
(OCI)
The condensed consolidated interim financial statements for the six-month
reporting period ended 30 June 2023 have been prepared in accordance the
UK-adopted International Accounting Standard 34, 'Interim Financial
Reporting'.
The interim report does not include all of the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the year ended 31 December 2022, and
any public announcements made by the Group during the interim reporting
period.
The financial information for the year ended 31 December 2022 contained in
these interim financial statements does not constitute the company's statutory
accounts for that period. Statutory accounts for the year ended 31 December
2022 have been delivered to the Registrar of Companies. The auditors' report
on those accounts was unqualified and did not contain a statement under 498(2)
or 498(3) of the Companies Act 2006. The auditor's report drew attention to a
material uncertainty related to the Group's ability to continue as a going
concern (refer to the going concern note below), however the auditor's opinion
was not modified in respect of this matter.
The level of rounding was changed to only reflect the nearest thousand for the
financial period ended
30 June 2023. Immaterial rounding adjustments were made to the comparative
information as a result of
this change.
Amendment to prior period figures
These financial statements have been restated to include certain amendments to
the figures for the 6 months to 30 June 2022. The amendments are driven by the
revised embedded derivative valuations included in the convertible loan notes
and Vermelho royalty financing arrangement at initial recognition. None of
these adjustments have a cash impact on the balance sheet.
The effect of these amendments on the statement of financial position and
statement of comprehensive are set out in the table below:
Property, plant and equipment Derivative financial asset Accumulated losses
Convertible loan notes
Royalties
US$'000 US$'000 US$'000 US$'000 US$'000
30 June 2022 - as previously stated 155,467 9,540 (82,838) (57,142) 41,032
Convertible loan note - revised embedded derivative valuation 3 - - 5,023
(5,026)
Vermelho royalty - revised buy-back option derivative valuation - 5,258 (5,010) - (248)
30 June 2022 - Amended 155,470 14,798 (87,848) (62,168) 45,807
As previously Revised convertible loan note embedded derivative valuation Revised allocation of convertible loan notes transaction costs Revised unwinding of discount on Vermelho royalty Amended as at
stated as at
30 June 2022
30 June 2022
US'000 US'000 US'000 US'000 US'000
Statement of comprehensive income
Administrative expenses (6,664) - (663) - (7,326)
Change in fair value of derivatives 4,361 (4,361) - - -
Gain/(Loss) on foreign exchange 9,383 - - - 9,383
Profit/(Loss) before interest and taxation 7,080 (4,361) (663) - 2,057
Net finance costs (3,232) - - 248 (2,984)
Profit/(Loss) before taxation 3,848 (4,361) (663) 248 (927)
Taxation - - - - -
Profit/(Loss) for the year from continuing operations 3,848 (4,361) (663) 248 (927)
Going concern
The condensed consolidated interim financial statements have been prepared on
a going concern basis. Although the Group's assets are not generating
revenues, the Directors have a reasonable expectation that the Group has
sufficient funds to undertake its operating activities for the foreseeable
future. The Group has cash reserves and access to liquidity which are
considered sufficient by the Directors to fund the Group's committed
expenditure both operationally and on its exploration project for the
foreseeable future.
The Group continued to make good progress on the construction of its Araguaia
Project during the six-month period ended 30 June 2023. The first drawdown
under the senior debt facility was completed in December 2022 following the
satisfaction of certain conditions precedent customary to a financing of this
nature. Subsequent drawdowns under the senior debt facility followed during
the six month period and further drawdowns are expected during the remainder
of the construction period, again following the satisfaction of certain
conditions precedent customary to a financing of this nature including but not
limited to satisfaction of a cost to complete exercise prior to each draw down
on the facility, satisfaction of minimum order values from certain suppliers,
maintaining the good standing of operational licences and permitting, and
financial models detailing the Group's budget forecasting compliance with
covenants and ratios. There is no guarantee that these conditions will be met.
The funds held at the end of the six-month period and the satisfaction of any
condition's precedent for further drawdowns of the senior debt facility
(including access to any of the funds secured as part of the cost overrun
facility), are considered sufficient by the Directors to fund its general
working capital requirements for the foreseeable future. However, there exists
a risk that the senior debt facility is not able to be drawn due to unforeseen
circumstances or noncompliance with any conditions precedent which may or may
not be within the control of the Group.
As at 30 June 2023 approximately 65% of the Araguaia Project construction has
been completed, a total of US$329million has been spent out of the budgeted
capital requirement of US$537million. As at the half year end, the Group had
total liquidity and funding sources of US$344million.
Additionally, despite being approximately 65% complete a number of risks still
exist around escalation costs linked to several of the major construction
packages (these include labour, materials and productivity). This could result
in future drawdowns on the senior debt facility not being permitted and
require the Group to pursue alternative sources of funding to meet its
commitments.
As the project moves into operational ramp-up phase there are a number of risk
areas around commissioning the RKEF process plant. If any of these ramp-up
risks exceed the pre-production funding allocated to the unit areas there will
be a requirement for additional funding.
As a number of these factors are outside of the Group's control, a material
uncertainty exists which may cast significant doubt about the Group's
continued ability to operate as a going concern and its ability to realise its
assets and discharge its liabilities in the normal course of business.
The financial statements do not include any adjustments that would result if
the Group were unable to continue as a going concern.
Intangible assets
Intangible assets comprise exploration and evaluation costs and goodwill.
Exploration and evaluation costs comprise internally generated and acquired
assets.
Exploration and
Goodwill Exploration licences evaluation costs Software Total
US$'000 US$'000 US$'000 US$'000 US$'000
Cost
At 1 January 2022 201 6,455 1,563 90 8,309
Additions - - 4,256 94 4,350
Amortisation for the year - - - (31) (31)
Exchange rate movements 14 649 (88) 6 581
Net book amount at 31 December 2022 215 7,104 5,731 159 13,209
Transfers - - (10) 56 46
Additions - - 5,380 16 5,396
Amortisation for the year - - - (25) (25)
Exchange rate movements 18 587 471 12 1,088
Net book amount at 30 June 2023 233 7,691 11,572 218 19,714
Exploration and evaluation assets
The exploration licences and exploration and evaluation costs relate to the
Vermelho project. No indicators of impairment were identified during the
period for the Vermelho project.
Vermelho
In January 2018, the acquisition of the Vermelho project was completed, which
resulted in a deferred consideration of $1,850,000 being recognised and
accordingly the amount was capitalised to the exploration licences held within
intangible assets shown above.
On 17 October 2020 the Group published the results of a Pre-Feasibility Study
on the Vermelho Nickel Cobalt Project, which confirms Vermelho as a large,
high-grade resource, with a long mine life and low-cost source of nickel
cobalt for the battery industry.
The economic and technical results from the study supports further development
of the project towards a full Feasibility Study and included the following:
· A 38-year mine life estimated to generate total cash flows after
taxation of US$7.3billion;
· An estimated Base Case post-tax Net Present Value1 ('NPV') of
US$1.7 billion and Internal Rate of Return ('IRR') of 26%;
· At full production capacity the Project is expected to produce an
average of 25,000 tonnes of nickel and 1,250 tonnes of cobalt per annum
utilising the High-Pressure Acid Leach process;
· The base case PFS economics assume a flat nickel price of
US$16,400 per tonne ('/t') for the 38-year mine life;
· C1 (Brook Hunt) cash cost of US$8,020/t Ni (US$3.64/lb Ni),
defines Vermelho as a low-cost producer; and
· Initial Capital Cost estimate is US$652 million (AACE class 4).
Nothing has materially deteriorated with the economics of the PFS between the
publication date and the date of this report and the Directors undertook an
assessment of impairment through evaluating the results of the PFS along with
recent market information relating to capital markets and nickel prices and
judged that there are no impairment indicators with regards to the Vermelho
Project. Nickel prices remain higher than they were at the time of the
publication of the PFS and overall sentiment towards battery metals and supply
materials have grown more positive over the period.
Property, plant and equipment
Mine Development Property Vehicles and other field equipment Office equipment Land acquisition Buildings improvement Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cost
At 1 January 2022 59,418 858 141 10,310 - 70,727
Additions 184,319 - 167 2,607 38 187,131
Environmental rehabilitation additions 635 - - - - 635
Transfers 781 (813) 32 - - -
Capitalised interest 13,176 - - - - 13,176
Disposals - - (3) - - (3)
Exchange rate movements 5,637 60 9 722 - 6,428
At 31 December 2022 263,966 104 348 13,639 38 278,094
Additions 143,093 - 78 24 - 143,195
Environmental rehabilitation additions 436 - - - - 436
Transfers (178) 24 105 - 6 (43)
Capitalised interest 5,451 - - - - 5,451
Disposals - - (4) - - (4)
Exchange rate movements 21,827 9 29 1,128 3 22,996
At 30 June 2023 434,595 137 555 14,791 47 450,125
Accumulated depreciation
At 1 January 2022 - 81 52 - - 133
Charge for the year - 7 42 - 1 50
Transfer - (1) 1 - - -
Disposals - - - - - -
Exchange rate movements - 5 4 - - 9
At 31 December 2022 - 92 99 - 1 192
Charge for the period - 2 35 - 1 38
Transfers - - - - - -
Disposals - - - - - -
Exchange rate movements - 8 7 - - 15
At 30 June 2023 - 102 141 - 2 245
-
Net book amount as at 30 June 2023 434,595 35 415 14,791 44 449,880
Net book amount as at 31 December 2022 263,965 12 249 13,639 37 277,902
In December 2018, a Canadian NI 43-101 compliant Feasibility Study (FS) was
published by the Company regarding the enlarged Araguaia Project which
included the Vale dos Sonhos deposit acquired from Glencore. The financial
results and conclusions of the FS clearly indicate the economic viability of
the Araguaia Project with an NPV of $401M using a nickel price of $14,000/t
Ni. Nothing material has changed with the economics of the FS between the
publication date and the date of this report and the Directors undertook an
assessment of impairment through evaluating the results of the FS along with
recent market information relating to capital markets and nickel prices and
judged that there are no impairment indicators with regards to the Araguaia
Project.
Impairment assessments for exploration and evaluation assets are carried out
either on a project-by-project basis or by geographical area.
The adjacent Araguaia/Lontra/Vila Oito and Floresta exploration sites (the
Araguaia Project), together with the Vale dos Sonhos deposit acquired from
Xstrata Brasil Mineração Ltda comprise a resource of a sufficient size and
scale to allow the Company to create a significant single nickel project. For
this reason, at the current stage of development, these two projects are
viewed and assessed for impairment by management as a single cash generating
unit.
The mineral concession for the Vale dos Sonhos deposit was acquired from
Xstrata Brasil Mineração Ltda, a subsidiary of Glencore Canada Corporation,
in November 2015.
The NPV has been determined by reference to the FS undertaken on the Araguaia
Project. The key inputs and assumptions in deriving the value in use were, the
discount rate of 8%, which is based upon an estimate of the risk adjusted cost
of capital for the jurisdiction, capital costs of $443 million, operating
costs of $8,194/t Nickel, a Nickel price of US$14,000/t and a life of mine of
28 years.
Cash and cash equivalents
30 June 2023 31 December 2022
US$'000
US$'000
Cash at bank and on hand 112,670 122,376
Short-term deposits 26,012 31,652
138,682 154,028
Access is restricted to cash and cash equivalents of US$29.8 million. These
funds have been secured in the case of a cost overrun against the construction
schedule and budget of the Araguaia Project. Refer to 'Cost overrun facility'
note for more details.
Royalty Financing liability
a.1) Araguaia royalty financing liability
On 29 August 2019 the Group entered into a royalty funding arrangement with
Orion Mine Finance ("OMF") securing a gross upfront payment of $25,000,000
before fees in exchange for a royalty, the rate being in a range from 2.25% to
3.00% and determined by the date of funding and commencement of major
construction. The rate has been confirmed to be 2.95%. The royalty is paid
over the first 426k tonnes of nickel produced from the Araguaia Ferronickel
project. The royalty is linked to production and therefore does not become
payable until the project is constructed and commences commercial production;
more detail is contained within the audited financial statements for the year
ended 31 December 2022. The agreement contains certain embedded derivatives
which as per IFRS9 have been separately valued and included in the fair value
of the financial instrument in note 13b).
The Royalty liability has initially been recognised using the amortised cost
basis with an effective interest rate of 14.5%. When circumstances arise that
lead to payments due under the agreement being revised, the group adjusts the
carrying amount of the financial liability to reflect the revised estimated
cash flows. This is achieved by recalculating the present value of estimated
cash flows using the original effective interest rate of 14.5%. Any adjustment
to the carrying value is recognised in the income statement.
The carrying value of the royalty reflects assumptions on expected long term
nickel price, update headline royalty rate as well as the timing of payments
related to expected date of commencement of production and hence payment to be
made under the royalty agreement.
The assumption influencing the increase in the carrying value of the royalty
since year end is the long-term nickel price which has increased from $18,721
t/Ni to $19,193 t/Ni. The royalty rate is 2.95%.
Management have sensitised the carrying value of the royalty liability for a
$1,000/t Ni increase/decrease in future nickel price the carrying value would
change by US$2,831,299.
a.2) Vermelho royalty financing liability
On 23 November 2021 the Group entered into a royalty funding arrangement with
Orion Mine Finance ("OMF") securing a gross upfront payment of $25,000,000
before fees in exchange for a royalty, at a rate of 2.1%. The royalty rate
will increase to 2.25% if substantial construction of the Vermelho Project has
not commenced within 5 years of the closing date, 30 March 2022. The royalty
will be paid over the life of mine of Vermelho. The Royalty agreement has
certain provisions to revise the headline royalty rate should there be change
in the mine schedule and production profile prior to construction or if the
resource covered in the Vermelho Feasibility Study is depleted. The royalty is
linked to production and therefore does not become payable until the project
is constructed and commences commercial production; more detail is contained
within the audited financial statements for the year ended 31 December 2022.
The agreement contains certain embedded derivatives which as per IFRS9 have
been separately valued and included in the fair value of the financial
instrument in note 13b). The royalty funds were received on 30 March 2022.
The Royalty liability has initially been recognised using the amortised cost
basis with an effective interest rate of 17.66%. When circumstances arise that
lead to payments due under the agreement being revised, the group adjusts the
carrying amount of the financial liability to reflect the revised estimated
cash flows. This is achieved by recalculating the present value of estimated
cash flows using the original effective interest rate of 17.66%. Any
adjustment to the carrying value is recognised in the income statement.
The carrying value of the royalty reflects assumptions on expected long term
nickel and cobalt prices, headline royalty rate as well as the timing of
payments related to expected date of commencement of production and hence
payment to be made under the royalty agreement.
The assumptions influencing the increase in the carrying value of the royalty
since year end is the movement in the long-term commodity prices - nickel
price from US$18,721 t/Ni to US$19,193 t/Ni and the cobalt price from
US$56,950 t/Co to US$53,846. The royalty rate has remained at 2.1%.
Management have sensitised the carrying value of the royalty liability by a
change in the royalty rate to 2.25% and it would be US$3,129,101 higher and
for a $1,000/t Ni increase/decrease in future nickel price and future cobalt
price the carrying value would change by US$2,090,138.
Araguaia Royalty valuation Vermelho Royalty valuation Total
US$'000 US$'000 US$'000
Net book amount at 1 January 2022 44,496 - 44,496
Initial recognition - 25,000 25,000
Embedded derivative - initial valuation - 9,848 9,848
Transaction costs - (848) (848)
Unwinding of discount 5,351 4,449 9,800
Change in carrying value (1,064) 2,513 1,449
Net book amount at 31 December 2022 48,783 40,962 89,745
Unwinding of discount 2,952 3,404 6,356
Change in carrying value 1,119 (559) 560
Net book amount at 30 June 2023 52,854 43,807 96,661
Derivative financial assets
b.1) Araguaia derivative financial assets
The aforementioned Araguaia royalty agreement includes several options
embedded within the agreement as follows:
· If there is a change of control of the Group and the start of
major construction works (as defined by the expenditure of in excess of $30m
above the expenditure envisaged by the royalty funding) is delayed beyond a
certain pre agreed timeframe the following options exist:
o Call Option - which grants Horizonte the option to buy back between 50 -
100% of the royalty at a valuation that meets certain minimum economic returns
for OMF;
o Make Whole Option - which grants Horizonte the option to make payment as
if the project had started commercial production and the royalty payment were
due; and
o Put Option - should Horizonte not elect for either of the above options,
this put option grants OMF the right to sell between 50 - 100% of the Royalty
back to Horizonte at a valuation that meets certain minimum economic returns
for OMF.
· Buy Back Option - At any time from the date of commercial
production, provided that neither the Call Option, Make Whole Option or the
Put Option have been actioned, Horizonte has the right to buy back up to 50%
of the Royalty at a valuation that meets certain minimum economic returns for
OMF.
The directors have undertaken a review of the fair value of all of the
embedded derivatives and are of the opinion that the Call Option, Make Whole
Option and Put Option currently have immaterial values as the probability of
both a change of control and project delay are currently considered to be
remote. There is considered to be a higher probability that the Group could in
the future exercise the Buy Back Option and therefore has undertaken a fair
value exercise on this option.
The initial recognition of the Buy Back Option has been recognised as an asset
on the balance sheet with any changes to the fair value of the derivative
recognised in the income statement. It has been fair valued using a Monte
Carlo simulation which runs a high number of scenarios in order to derive an
estimated valuation. The Monte Carlo simulation was last performed at the 31
December 2022 year end. The Monte Carlo simulation is performed annually at
the year-end date. The assumptions driving the buy-back option valuation were
assessed as at 30 June 2023 and it was concluded that the change in the
valuation would not be material.
The assumptions for the valuation of the Buy Back Option (per the Monte Carlo
simulation) are the future nickel price of (US$18,721/t Ni), the start date of
commercial production (March 2024), the prevailing royalty rate (2.95%), the
inflation rate (2.22%) and volatility of nickel prices (39.7%).
Sensitivity analysis
The valuation of the Buyback option is most sensitive to future nickel price
estimates and nickel price volatility.
A 15% adjustment to the estimated future nickel price would result in a
variance between US$2.7 million and US$3 million in the valuation.
b.2) Vermelho derivative financial assets
Horizonte has the right to buy back 50% of the royalty on the first four
anniversaries of closing (or on any direct or indirect change of control in
respect of Vermelho up until the fourth anniversary of closing).
After the 4th anniversary, Horizonte has the right to buy back 50% of the
royalty on any direct or indirect change of control in respect of Vermelho at
a valuation that meets certain minimum economic returns for OMF.
The initial recognition of the Buy Back Option has been recognised as an asset
on the balance sheet with any changes to the fair value of the derivative
recognised in the income statement. It has been fair valued using a Monte
Carlo simulation which runs a high number of scenarios in order to derive an
estimated valuation. The Monte Carlo simulation was last performed at the 31
December 2022 year end. The Monte Carlo simulation is performed annually at
the year-end date. The assumptions driving the buy-back option valuation were
assessed as at 30 June 2023 and it was concluded that the change in the
valuation would not be material.
The assumptions for the valuation of the Buy Back Option (per the Monte Carlo
simulation) are the future nickel price (US$18,721/t Ni), the future cobalt
price (US$56,950/t Co), the production profile from 2027 to 2065, the expected
royalty rate (2.1%), the inflation rate (2,22%), volatility of nickel prices
(22.1%) and volatility of cobalt prices (28.0%).
Sensitivity analysis
The valuation of the Buyback option is sensitive to estimates for nickel and
cobalt prices and their respective volatilities.
A 15% adjustment to the estimated future nickel and cobalt prices would result
in a variance of US$3.7 million in the valuation.
Refer to the table below for the summary of the derivative financial asset's
valuation:
Araguaia Royalty Vermelho Royalty Total
US$'000 US$'000 US$'000
Value as at 1 January 2022 4,950 - 4,950
Initial recognition - 9,848 9,848
Change in fair value 57 (366) (309)
Value as at 31 December 2022 5,007 9,482 14,489
Value as at 30 June 2023 5,007 9,482 14,489
Convertible loan notes
On 29 March 2022 the Company issued convertible loan notes to the value of $65
million at an interest rate of 11.75% with interest accruing quarterly in
arrears. The convertible loan notes were issued at a discount of 5.75%. The
maturity date of the instruments is 15 October 2032.
The convertible loan notes are unsecured and the noteholders will be repaid as
follows:
· Interest shall be capitalised until the Araguaia Project
Completion date, estimated to be 31 December 2025 (subject to various
technical operating tests being passed)
· After Project Completion Date, interest shall be paid quarterly
only if there is available cash (after the company meets its senior debt and
other senior obligations)
· After Project Completion Date, principal repayments (including
accrued capitalized interest) shall be paid quarterly subject to available
cash for distribution. In addition, a cash sweep of 85% of excess cash will
apply on each interest payment date
· Any amount outstanding on the CLN on the maturity date 15 October
2032, Horizonte is obliged to settle in full on the maturity date.
At any time until the Maturity Date, the Noteholder may, at its option,
convert the notes, partially or wholly, into a number of ordinary shares up to
the total amount outstanding under the Convertible Note divided by the
Conversion Price. The Conversion Price is 125% of the Subscription Price of
1.40 pence, converted to US$ at a rate of 1.3493. The Conversion Price is
therefore US$1.89. The Conversion Price was revised to £1.268/US$1.71 after
the completed equity fundraise on 8 November 2022.
The convertible loan is a hybrid financial instrument, whereby a debt host
liability component and an embedded derivative liability component was
determined at initial recognition. The conversion option did not satisfy the
fixed for fixed equity criterion (fixed number of shares and fixed amount of
functional currency cash) as the currency of the convertible loan notes is US
Dollar and the functional currency of Horizonte Minerals Plc and its share
price is GBP.
For convertible notes with embedded derivative liabilities, the fair value of
the embedded derivative liability is determined first and the residual amount
is assigned to the debt host liability.
The initial recognition of the embedded derivative conversion feature has been
recognised as a liability on the balance sheet with any changes to the fair
value of the derivative recognised in the income statement. It has been fair
valued using a Monte Carlo simulation which runs a high number of scenarios in
order to derive an estimated valuation. The Monte Carlo simulation was last
performed at the 31 December 2022 year end. The Monte Carlo simulation is
performed annually at the year-end date. The assumptions driving the buy-back
option valuation were assessed as at 30 June 2023 and it was concluded that
the change in the valuation would not be material.
The assumptions for the valuation of the conversion feature (per the Monte
Carlo simulation), at the year-end date 31 December 2022, are the Horizonte
Minerals Plc future share price volatility (42.9%), GBP:USD exchange rate
volatility (10%) on the conversion price.
The debt host liability will be accounted for using the amortised cost basis
with an effective interest rate of 19%. The effective interest rate is
recalculated after adjusting for the transaction costs. The Group will
recognise the unwinding of the discount at the effective interest rate, until
the maturity date, the carrying amount at the maturity date will equal the
cash payment required to be made.
The directly attributable transaction costs were allocated proportionately to
the embedded derivative and the convertible loan notes liability. The embedded
derivative transaction costs were recognised in profit and loss, whereas the
convertible loan liability transaction costs were deducted from the financial
liability carrying amount.
After the fifth anniversary of the closing date, Horizonte shall have a
one-time right to redeem the Convertible Notes, in whole, at 105% of the par
value plus accrued and unpaid interest in cash if:
1. The thirty-business day VWAP of Horizonte shares exceeds 200% of
the Conversion Price and the average daily liquidity of the Company's shares
(across all relevant exchanges) exceeds US$2.5 million per trading day over
the prior 30 trading days; or
2. There is a change of control.
Management have assessed the likelihood of the above events occurring is
highly improbable and thus the value of the redemption right is immaterial and
was thus not considered in the valuation of the instrument.
Sensitivity analysis - Conversion feature derivative
The valuation of the conversion feature derivative is sensitive to the
Company's equity price and share price volatility. A 15% adjustment on the
Company's equity price results in a variance of between US$7.6million and
US$8.3million in the valuation. A 30% adjustment on the equity volatility
results in a variance of US$4.9million.
Refer to the table below for the summary of the convertible loan notes
valuation:
Embedded derivative Convertible loan notes liability Total
US$'000 US$'000 US$'000
Initial recognition (after discount on issue) 36,458 24,804 61,262
Transaction costs - (950) (950)
Unwinding of discount - 5,957 5,957
Change in fair value (6,821) - (6,821)
Value as at 31 December 2022 29,637 29,811 59,448
Unwinding of discount - 4,675 4,675
Value as at 30 June 2023 29,637 34,486 64,123
Cost overrun facility
On 30 November 2022, the Group satisfied all conditions precedent in relation
to the cost overrun facility (COF) and had received all COF funds from Orion.
The COF benefits from the same security package as the senior debt facility
but will be subordinated to the senior debt facility. Access to the COF funds
is restricted and will only be available in the case of a cost overrun against
the Araguaia Project construction schedule and budget, subject to certain
conditions including:
1. 90% of the funding from the Equity Fundraise and Convertible loan
notes have been invested in the construction of the Araguaia Project
2. A gearing ratio of 70:30 being met
The COF is US$25million with an interest rate of 13% and a maturity date of 15
October 2032. Interest will be calculated quarterly and be payable in arrears
at the end of each interest period - March 31, June 30, September 30 and
December 31. The first interest period was 30 November to 31 December 2022.
The initial principal repayment date is 31 March 2025. 3.23% of the
outstanding principal amount will be paid at each quarter end date starting
from 31 March 2025.
The COF will be accounted for using the amortised cost basis with an effective
interest rate of 15%. The effective interest rate is recalculated after
adjusting for the transaction costs. The Group will recognise the unwinding of
the discount at the effective interest rate, until the maturity date, the
carrying amount at the maturity date will equal the cash payment required to
be made.
Total
US$'000
Initial recognition 25,000
Transaction costs (1,198)
Unwinding of discount 288
Interest repayments (280)
Value as at 31 December 2022 23,810
Unwinding of discount 1,705
Interest repayments (1,643)
Value as at 30 June 2023 23,872
Senior debt facility
On 15 March 2022 the Group entered into legally binding documentation
including a comprehensive intercreditor agreement and loan agreements with two
export credit agencies in relation to its senior secured project finance debt
facility of US$346.2 million. The senior debt facility was executed between
Araguaia Niquel Metais LTDA, and a syndicate of international financial
institutions, being BNP Paribas, BNP Paribas Fortis, ING Capital LLC, ING Bank
N.V., Natixis, New York Branch, Société Générale and SEK (Swedish Export
Credit Corporation).
The senior debt facility includes the following:
· Commercial senior facility of US$200,000,000 provided by the
Senior Lenders;
· ECA facility of US$74,562,000 guaranteed by EKF (Denmark's Export
Credit Agency);
· ECA facility of US$71,638,000 guaranteed by Finnvera plc
(Finland's Export Credit Agency);
On 7 December 2022, the Group satisfied all conditions precedent for the first
utilisation under the senior debt facility of US$346.2 million.
The interest rate on the ECA facility is calculated according to this formula:
Margin + Term SOFR (Secured Overnight Financing Rate) + Baseline Credit
Adjustment Spread (CAS). The ECA Facility margin is 1.8%. The Term SOFR at 30
June 2023 was 5.24187% and the Baseline CAS 0.261610%. The ECA facility
interest rate was therefore 7.30348% at 30 June 2023.
The interest rate on the Commercial facility is calculated according to this
formula: Margin + Term SOFR (Secured Overnight Financing Rate) + Baseline
Credit Adjustment Spread (CAS). The Commercial Facility margin is 4.75%. The
Term SOFR at 30 June 2023 was 5.24187% and the Baseline CAS 0.261610%. The
Commercial facility interest rate was therefore 10.25348% at 30 June 2023.
Interest is calculated quarterly and payable in arrears at the end of each
interest period - March 31, June 30, September 30 and December 31. The initial
principal repayment date is 31 March 2025. The outstanding principal amount
will be paid according to the repayment schedule at each quarter end date
starting from 31 March 2025.
The final maturity date on the Commercial Facility is 15 July 2030. The final
maturity date on the ECA Facility is 15 July 2032.
The ECA and Commercial Facilities will be accounted for using the amortised
cost basis with effective interest rates of 12.25% and 11.57% respectively.
The effective interest rate is recalculated after adjusting for the
transaction costs. The Group will recognise the unwinding of the discount at
the effective interest rate, until the maturity date, the carrying amount at
the maturity date will equal the cash payment required to be made.
The Senior Debt Facility is secured via a comprehensive security package which
includes:
• Pledge of shares in the Araguaia Níquel Metais Ltda. (the
"Borrower");
• Pledge of shares of the guarantors (other than Horizonte
Minerals plc);
• First ranking security over all of the Araguaia Project's
assets (including its mineral rights);
• Assignment of insurance policies;
• Assignment of material project contracts (including rights
under hedge agreements);
• Charge over certain bank accounts of the Borrower
(including the debt service bank account, the cost overrun account and the
insurance proceeds account); and
• Assignment of credit related to intercompany loans (by the
Group borrowing entity) and subordination of the debt related to inter-company
loans (by the Group lending entity).
ECA Facility Commercial Facility Total
US$'000 US$'000 US$'000
Initial recognition 2,111 2,889 5,000
Transaction costs (446) (232) (678)
Unwinding of discount 12 19 31
Interest repayments (8) (17) (25)
Value as at 31 December 2022 1,669 2,659 4,328
Loan drawdowns 57,010 77,990 135,000
Transaction costs (11,830) (5,464) (17,294)
Unwinding of discount 1,155 1,807 2,962
Interest repayments (872) (1,703) (2,575)
Change in carrying value 3,021 2,875 5,896
Value as at 30 June 2023 50,153 78,164 128,317
As at 30 June 2023 the drawn vs undrawn balance on the senior debt facility
was as follows:
Drawn Undrawn Total
US$'000 US$'000 US$'000
Commercial 80,879 119,121 200,000
EKF ECA 30,151 44,409 74,560
Finnvera ECA 28,970 42,670 71,640
140,000 206,200 346,200
Note to statement of cash flows
Below is a reconciliation of borrowings from financial transactions:
Senior Debt Facility Cost Overrun Facility Convertible Loan Notes Liability Royalty Financing Derivative asset Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Total non-current borrowings 31 December 2021 - - - 44,496 (4,950) 39,546
Cash flow adjustments:
Initial recognition 5,000 25,000 61,262 25,000 - 116,262
Transaction costs (678) (1,198) (950) (848) - (3,674)
Interest payments (25) (280) - - - (305)
Non cash flow adjustments:
Embedded derivative - initial valuation - - - 9,848 (9,848) -
Unwinding of discount 32 288 5,957 9,799 - 16,076
Change in carrying value /fair value - - (6,821) 1,449 309 (5,063)
Total non-current borrowings 31 December 2022 4,328 23,810 59,448 89,745 (14,489) 162,841
Cash flow adjustments:
Loan drawdowns 135,000 - - - - 135,000
Transaction costs (17,294) - - - - (17,294)
Interest payments (2,575) (1,643) - - - (4,218)
Non cash flow adjustments:
Unwinding of discount 2,962 1,705 4,675 6,356 - 15,698
Change in carrying value 5,896 - - 560 - 6,456
Total non-current borrowings 30 June 2023 128,317 23,872 64,123 96,661 (14,489) 298,484
Events after the reporting period
The Company awarded new share options on 13 July 2023 (the "Award Date") over
2,435,035 ordinary shares of £0.20 each in the capital of the Company to
executives (PDMRs) and key personnel in the UK and Brazil under the Company's
unapproved (or 'non tax-advantaged') 2006 Share Options Scheme (the "Awards").
Each Award is exercisable in return for one ordinary share in the Company and
will vest in three tranches on the 6-month, 12-month and 18-month
anniversaries of the Award Date (with additional 12 months vesting period for
certain employees) at a ratio of 1/3 each tranche, with exercise price of
£1.70 per ordinary share. The exercise price of £1.70 represents a premium
of 10.4% to the closing price on 12 July 2023 of £1.54.
On 28 July 2023 the Group issued 700,000 ordinary shares at a price of 79.64
pence following the exercise of options by option holders.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR FLFITTRIRLIVRecent news on Horizonte Minerals
See all newsREG - Horizonte Minerals - Corporate Update
AnnouncementREG - Horizonte Minerals - Corporate Update
AnnouncementREG - Horizonte Minerals - Corporate Update
AnnouncementREG - Horizonte Minerals - Corporate Update
AnnouncementREG - Horizonte Minerals - Araguaia Project Update
Announcement