REG - Horizonte Minerals - Q1 Financial Results
16/05/2022 07:00
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RNS Number : 5315L Horizonte Minerals PLC 16 May 2022
NEWS RELEASE
16 May 2022
Horizonte Minerals Plc
("Horizonte" or the "Company")
Q1 Financial Results For The Three Months Ended 31 March 2022
Horizonte Minerals Plc (AIM: HZM, TSX: HZM), the nickel company focused in
Brazil announces it has today published its unaudited financial results for
the three month period to 31 March 2022 and the Management Discussion and
Analysis for the same period. Both of the aforementioned documents have been
posted on the Company's website www.horizonteminerals.com
(http://www.horizonteminerals.com/) and are also available on SEDAR
at www.sedar.com (http://www.sedar.com/) .
Highlights for the period:
• Closing of US$633 million funding package for construction of
Araguaia nickel project
• Awarded a number of key construction contracts including furnace,
EPCM, and earthworks
• Further additions to the project execution team
• Approved start of construction in late January 2022 with earthworks
contractor mobilised to site in May to maximise productivity during the dry
season
• Project development work is running in line with the project
execution schedule with a significant ramp-up in activity expected over the
coming months as we move into the dry season
• Company to adopt reporting currency to USD (previously GBP) ahead of
first revenue in 2024
• Strong balance sheet with cash and cash equivalents US$252m at 31
March 2022
Financial Update
The Company concluded the funding package of US$633 million in December 2021.
The net proceeds of the fundraising will be used towards the construction of
the Araguaia project as well as for general working capital purposes. The
equity fundraise (US$197million of the US$633 million) was finalised and funds
were received in December 2021. The debt elements of the funding package
include Convertible Loan Notes (US$65 million), a Cost Overrun Facility of
US$25 million, and a Senior Debt Facility of US$346.2 million were closed
during March 22. First draw is expected on from the senior debt facility in
late Q3 22.
The Company has changed its presentation currency from Pounds Sterling to US
Dollars effective 1 January 2022. The presentation currency has been revised
as the financing package concluded by the Group to construct the Araguaia
project is denominated in US Dollars and future revenues will also be in US
Dollars. The Board, therefore, believes that US Dollar financial reporting
provides a more relevant presentation of the group's financial position,
funding and treasury functions, financial performance, and cash flows.
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)
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
Tavistock (Financial PR) +44 (0) 20 7920 3150
Jos Simson
Cath Drummond
ABOUT HORIZONTE MINERALS
Horizonte Minerals plc (AIM & TSX: HZM) is developing two 100%-owned, Tier
1 projects in Parà state, Brazil - the Araguaia Nickel Project and the
Vermelho Nickel-Cobalt Project. Both projects are large scale, high-grade,
low-cost, low-carbon and scalable. Araguaia is fully funded and in
construction. The project will produce 29,000 tonnes of nickel per year to
supply the stainless steel market. Vermelho is at feasibility study stage and
will produce 25,000 tonnes of nickel and 1,250 tonnes of cobalt to supply the
EV battery market. Horizonte's combined near-term production profile of over
50,000 tonnes of nickel per year positions the Company as a globally
significant nickel producer. Horizonte is developing a new nickel district in
Brazil that will benefit from established infrastructure, including
hydroelectric power available in the Carajás Mining District.
Horizonte Minerals Plc
Restated Unaudited Condensed Consolidated Interim Financial Statements for the
three months ended 31 March 2022
Restated Condensed Consolidated Statement of Comprehensive Income
3 months ended
31 March
2022 2021 Restated
Unaudited Unaudited
Notes US$ US$
Administrative expenses (2,380,986) (1,131,952)
Change in fair value of special warrant liability - (417,863)
Gain/(loss) on foreign exchange 7,073,006 254,556
Loss before interest and tax 4,692,020 (1,295,259)
Net finance (costs)/income 5 (173,134) (69,580)
Loss before taxation 4,518,886 (1,364,839)
Taxation - -
Loss for the year 4,518,886 (1,364,839)
Other comprehensive income Items that may be reclassified subsequently to
profit or loss
Currency translation differences on translating foreign operations 17,973,334 (5,431,573)
17,973,334 (5,431,573)
Other comprehensive income for the period, net of tax
Total comprehensive income for the period 22,492,220 (6,796,412)
attributable to equity holders of the Company
Earnings per share attributable to the equity holders of the Company
Basic & Diluted earnings per share (pence per share) 14 0.119 (0.090)
Restated Condensed Consolidated Statement of Financial Position
31 March 31 December
2022 2021 Restated
Unaudited Audited
Notes US$ US$
Assets
Non-current assets
Intangible assets 6 10,011,946 8,309,485
Property, plant & equipment 7 123,230,028 70,594,090
Right of use assets 426,295 380,482
133,668,269 79,284,057
Current assets
Trade and other receivables 18,283,570 13,796,628
Derivative financial asset 10 b 9,540,000 4,950,000
Cash and cash equivalents 251,760,931 210,492,280
279,584,501 229,238,908
Total assets 413,252,770 308,522,965
Equity and liabilities
Equity attributable to owners of the parent
Issued capital 8 52,215,236 52,215,236
Share premium 8 245,388,102 247,847,561
Other reserves (7,758,849) (25,732,183)
Accumulated losses (40,558,760) (45,077,646)
Total equity 249,285,729 229,252,968
Liabilities
Non-current liabilities
Contingent consideration 9 6,847,422 6,734,132
Royalty Finance 10 a 77,127,949 44,496,504
Deferred consideration 9 4,568,669 4,526,425
Convertible loan notes liability 11 58,955,500 -
Lease liabilities 358,424 321,717
Trade payables 774,236 608,976
148,632,200 56,687,754
Current liabilities
Trade and other payables 14,314,743 21,574,365
Deferred consideration 9 950,792 949,113
Lease liabilities 69,306 58,765
15,334,841 22,582,243
Total liabilities 163,967,040 79,269,997
Total equity and liabilities 413,252,770 308,522,965
Restated Condensed Statement of Changes in Shareholders' Equity
Attributable to the owners of the parent
Share Share Accumulated Other
capital premium losses reserves Total
US$ US$ US$ US$ US$
As at 1 January 2021 Restated 20,666,053 65,355,677 (33,304,178) (23,519,096) 29,198,456
Comprehensive income
Loss for the period - - (1,364,839) - (1,368,839)
Other comprehensive income
Currency translation differences - - - (5,431,573) (5,431,573)
Total comprehensive income - - (1,364,839) (5,431,573) (6,796,412)
Transactions with owners
Issue of ordinary shares 2,281,637 14,830,639 - - 17,112,276
Issue costs - (1,037,822) - - (1,037,822)
Total transactions with owners 2,281,637 13,792,817 - - 16,074,454
As at 31 March 2021 Restated (unaudited) 22,947,690 79,148,494 (34,669,017) (28,950,669) 38,476,498
Attributable to the owners of the parent
Share Share Accumulated Other
capital premium losses reserves Total
US$ US$ US$ US$ US$
As at 1 January 2022 Restated 52,215,236 247,847,561 (45,077,646) (25,732,183) 229,252,968
Comprehensive income
Loss for the period - - 4,518,886 - 4,518,886
Other comprehensive income
Currency translation differences - - - 17,973,334 17,973,334
Total comprehensive income - - 4,518,886 17,973,334 22,492,220
Transactions with owners
Issue of ordinary shares - - - - -
Issue costs - (2,459,459) - - (2,459,459)
Total transactions with owners - (2,459,459) - - (2,459,459)
As at 31 March 2022 (unaudited) 52,215,236 245,388,102 (40,558,760) (7,758,849) 249,285,729
Restated Condensed Consolidated Statement of Cash Flows
3 months ended
31 March
2022 2021
Restated
Unaudited Unaudited
US$ US$
Cash flows from operating activities
Loss before taxation 4,518,886 (1,364,839)
Net finance costs/(income) 5 173,134 69,580
Change in fair value of special warrant liability - 417,863
Exchange differences (7,073,006) (254,556)
Operating loss before changes in working capital (2,380,986) (1,131,952)
Decrease/(increase) in trade and other receivables (1,291,962) (99,794)
(Decrease)/increase in trade and other payables (7,094,361) (69,794)
Net cash outflow from operating activities (10,767,309) (1,301,540)
Cash flows from investing activities
Purchase of intangible assets 6 (217,347) (36,281)
Purchase of property, plant and equipment 7 (36,106,248) (1,510,343)
Interest received 5 623,058 39,054
Net cash used in investing activities (35,700,537) (1,507,570)
Cash flows from financing activities
Net proceeds from issue of ordinary shares - 16,074,454
Issue costs (2,459,459) -
Proceeds from issue of convertible loan notes 61,262,500 -
Issue costs (2,347,041) -
Proceeds from royalty finance arrangement 25,000,000 -
Issue costs (847,939) -
Net proceeds from issue of share warrants - 8,448,140
Net cash from financing activities 80,608,061 24,522,594
Net decrease in cash and cash equivalents 34,140,215 21,713,484
Cash and cash equivalents at beginning of period 210,492,280 14,925,021
Exchange gain/(loss) on cash and cash equivalents 7,128,436 (312,237)
Cash and cash equivalents at end of the period 251,760,931 36,326,268
Restated Notes to the Financial Statements
1. General information
The principal activity of the Company and its subsidiaries (together 'the
Group') is the exploration and development of precious and base metals. There
is no seasonality or cyclicality of the Group's operations.
The Company's shares are listed on the Alternative Investment Market of the
London Stock Exchange (AIM) and on the Toronto Stock Exchange (TSX). The
Company is incorporated and domiciled in the United Kingdom. The address of
its registered office is Rex House, 4-12 Regent Street, London SW1Y 4RG.
2. Basis of preparation
The financial statements for the year ended 31 December 2021 were prepared in
accordance with International Financial Reporting Standards and International
Accounting Standards as issued by the International Accounting Standards Board
(IASB) and Interpretations (collectively IFRSs).
On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into UK law and became UK-adopted international accounting standards,
with future changes being subject to endorsement by the UK Endorsement Board.
The Group transitioned to UK-adopted international accounting standards in its
consolidated financial statements on 1 January 2021. There was no impact or
changes in accounting policies from the transition and the Group will also
continue to comply with IFRS and their interpretations issued by the IASB.
The condensed consolidated interim financial statements for the three month
reporting period ended 31 March 2022 have been prepared in accordance with IAS
34 as issued by the IASB and 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 2021, and
any public announcements made by the Group during the interim reporting
period.
The financial information for the year ended 31 December 2021 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
2021 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.
Change in presentation currency
Horizonte Minerals Plc has decided to change its presentation currency from
Pounds Sterling to US Dollars effective 1 January 2022.
The presentation currency has been revised as the financing package concluded
by the Group to construct the Araguaia project is denominated in US Dollars
and future revenues will also be in US Dollars. The board therefore believes
that US Dollar financial reporting provides more relevant presentation of the
group's financial position, funding and treasury functions, financial
performance and its cash flows.
A change in presentation currency represents a change in an accounting policy
in terms of IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors requiring the restatement of comparative information. IAS 34 does not
require additional retrospective disclosure of the statement of financial
position. In accordance with IAS 21 The Effects of Changes in Foreign Exchange
Rates, the following methodology was followed in restating historical
financial information from Pounds Sterling to US Dollar:
· Assets and liabilities were translated at the relevant closing
exchange rate at the end of the reporting period. Items of income and
expenditure and cash flows were translated at average rates of exchange for
the period;
· The foreign currency translation reserve was reset to nil as at 1
January 2006, the date on which the group adopted IFRS. Share capital and
premium and other reserves, as appropriate, were translated at the historic
rates prevailing at the dates of underlying transactions; and
· The effects of translating the group's financial results and
financial position into US Dollar were recognised in the foreign currency
translation reserve.
The exchange rates used were as follows:
GBP/USD 31 December 2021 31 March 2021
Closing rate 1.3477 1.3797
Average rate 1.3774 1.3791
USD/BRL
Closing rate 5.5710 5.6973
Average rate 5.3810 5.4801
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 consider that the Group has sufficient funds to
undertake its operating activities for a period of at least the next 12 months
including any additional expenditure required in relation to its current
exploration projects. The Group has cash reserves which are considered
sufficient by the Directors to fund the Group's committed expenditure both
operationally and on its exploration project for the foreseeable future.
The Group concluded a comprehensive funding package of US$633 million in
December 2021. The net proceeds of the fundraising will be used towards the
construction of the Araguaia project as well as for general working capital
purposes. In addition the company has also concluded a US$25million royalty on
the Vermelho Project, the net proceeds from the sale of this royalty will be
used to advance a feasibility study and permitting work streams on the
Vermelho project. The equity fundraise (US$197million of the US$633 million)
was finalized and funds received in December 2021. The debt elements of the
funding package include Convertible Loan Notes (US$65 million), a Cost Overrun
Facility (US$25 million) and a Senior Debt Facility (US$346.2 million).
Funds from the convertible loan notes and the royalty was received in March
2022. The first drawdown under the Senior Debt Facility is expected to occur
in September 2022 following the satisfaction of certain conditions precedent
customary to a financing of this nature. As the senior debt is conditional,
there is no guarantee that the conditions of this element of the debt package
will be satisfied.
The funds held at the year-end along with those to be raised post year end
means the Group has cash reserves which are considered sufficient by the
Directors to execute the construction of the Araguaia Project and fund its
general working capital requirements for the foreseeable future. The drawdown
of the Senior Debt Facility is conditional upon the expenditure of a certain
level of equity amongst other conditions precedent, by which time the company
is expected to have made significant financial commitments. 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. Should the Senior Debt not be drawn
then the Group might require alternative sources of funding to meet its
commitments.
These events are outside of the Group's control, and as such, 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.
If additional projects are identified and the Vermelho project advances,
additional funding may be required.
These factors indicate the existence of a material uncertainty which may cast
significant doubt over the Group and the Company's ability to continue as a
going concern and therefore they may be unable to realise its assets and
discharge their 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.
Assessment of the impact of COVID-19
During the period of these financial statements there has been an ongoing
significant global pandemic which has had significant knock-on effects for the
majority of the world's population, by way of the measure's governments are
taking to tackle the issue. This represents a risk to the Group's operations
by restricting travel, the potential to detriment the health and wellbeing of
its employees, as well as the effects that this might have on the ability of
the Group to finance and advance its operations in the timeframes envisaged.
The Group has taken steps to try and ensure the safety of its employees and
operate under the current circumstances and feels the outlook for its
operations remains positive, however risk remain should the pandemic worsen or
changes its impact on the Group. The assessment of the possible impact on
the going concern position of the Group is set out in the going concern note
above. In addition, because of the long-term nature of the Group's nickel
projects and their strong project economics management do not consider that
COVID has given rise to any impairment indicators. The Group has not received
any government assistance.
The uncertainty as to the future impact of the Covid-19 pandemic has been
considered as part of the Group's adoption of the going concern basis. In
response to the easing of Covid-19 restrictions, employees are working from
the Group's offices in London and Brazil and will continue to adhere to
government guidelines. International travel has resumed and site work for the
two projects has been resumed.
To date, the Group has not been materially adversely affected by the COVID-19
pandemic. However, the ongoing nature and uncertainty of the pandemic in many
countries including the measures and restrictions put in place (travel bans
and quarantining in particular) continue to have the ability to impact the
Group's business continuity, workforce, supply-chain, business development
and, consequently, future revenues.
In addition, any infections occurring on the Group's premises could result in
the Group's operations being suspended, which may have an adverse impact on
the Group's operations as well as adverse implications on the Group's future
cash flows, profitability and financial condition. Supply chain disruptions
resulting from the COVID-19 pandemic and measures implemented by governmental
authorities around the world to limit the transmission of the virus (such as
travel bans and quarantining) may, in addition to the general level of
economic uncertainty caused by the COVID-19 pandemic, also adversely impact
the Group's operations, financial position and prospects.
As a result of considerations noted above, the Directors consider the impact
of COVID-19 could delay the drawdown of the senior debt facility.
Risks and uncertainties
The Board continuously assesses and monitors the key risks of the business.
The key risks that could affect the Group's medium term performance and the
factors that mitigate those risks have not substantially changed from those
set out in the Group's 2021 Annual Report and Financial Statements, a copy of
which is available on the Group's website: www.horizonteminerals.com
(http://www.horizonteminerals.com) and on Sedar: www.sedar.com
(http://www.sedar.com) . In addition to the key risks, the key financial risks
are liquidity risk, foreign exchange risk, credit risk, price risk and
interest rate risk.
Use of estimates and judgements
The preparation of condensed consolidated interim financial statements
requires management to make estimates and judgements that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the end of the reporting period. Significant items subject to
such estimates are set out in note 4 of the Group's 2021 Annual Report and
Financial Statements. The nature and amounts of such estimates and judgements
have not changed significantly during the interim period.
3. Significant accounting policies
The same accounting policies, presentation and methods of computation have
been followed in these condensed consolidated interim financial statements as
were applied in the preparation of the Group's audited Financial Statements
for the year ended 31 December 2021 except for the new accounting policy
applied for the convertible loan notes which is detailed below.
Capitalisation of borrowing costs
Borrowing costs are expensed except where they relate to the financing of
construction or development of qualifying assets. Borrowing costs directly
related to financing of qualifying assets in the course of construction are
capitalised to the carrying value of the Araguaia mine development property.
Where funds have been borrowed specifically to the finance the Project, the
amount capitalised represents the actual borrowing costs incurred net of all
interest income earned on the temporary re-investment of these borrowings
prior to utilisation. Borrowing costs capitalised include:
· Interest charge on the Araguaia royalty finance
· Adjustments to the carrying value of the Araguaia royalty finance
· Unwinding of discount on contingent consideration payable for
Araguaia
· Unwinding of discount on the convertible loan notes
All other borrowing costs are recognized as part of interest expense in the
year which they are incurred.
Derivative financial instrument
Derivatives are initially measured at fair value, and changes therein are
recognised in profit or loss. All directly attributable transaction costs
are recognised in profit or loss as incurred.
Foreign currency translation
(a) Functional and presentation currency
Items included in the Financial Statements of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates (the functional currency). The functional currency of the UK
and Isle of Man entities is Pounds Sterling and the functional currency of the
Brazilian entities is Brazilian Real. The functional currency of the project
financing subsidiary incorporated in the Netherlands is US Dollars. The
Consolidated Financial Statements as at 31 December 2021 were presented in
Pounds Sterling, rounded to the nearest pound, which is the Company's
functional and Group's presentation currency. As disclosed in note 2 Basis of
Preparation, for the financial year commencing 1 January 2022 and future
financial years the Group's presentation currency will be US Dollars, rounded
to the nearest dollar.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions or
valuation where such items are re-measured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in profit or loss.
(c) Group companies
The results and financial position of all the Group's entities (none of which
has the currency of a hyperinflationary economy) that have a functional
currency different from the presentation currency are translated into the
presentation currency as follows:
1. assets and liabilities for each statement of financial position
presented are translated at the closing rate at the date of that statement of
financial position;
2. each component of profit or loss is translated at average exchange
rates during the accounting period (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the
dates of the transactions); and
3. all resulting exchange differences are recognised in other
comprehensive income.
On consolidation, exchange differences arising from the translation of the net
investment in foreign entities, and of monetary items receivable from foreign
subsidiaries for which settlement is neither planned nor likely to occur in
the foreseeable future are taken to other comprehensive income. When a foreign
operation is sold, such exchange differences are recognised in profit or loss
as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
retranslated at the end of each reporting period.
The major exchange rates used for the revaluation of the statement of
financial position at 31 March 2022 were £1:US$1.32 (31 December 2021:
£1:US$1.35), Brazilian Real (R$):US$0.21 (31 December 2021: R$:US$0.18).
Foreign currency translation reserve includes movements that relate to the
retranslation of the subsidiaries whose functional currencies are not US
Dollars.
During the first quarter of 2022, the Brazilian Real strengthened by
approximately 15% from R$5.57 to R$4.74 against the US Dollar since 31
December 2021 (31 March 2021: weakened approximately by 10% from R$5.20 at 31
December 2020 to R$5.70). Currency translation differences for the three month
period of £18 million gain (2021:$5.4 million loss) included in the
consolidated statement of comprehensive income arose on the translation of
property plant and equipment, intangible assets and cash and cash equivalents
denominated in Brazilian Real and Pounds Sterling.
The foreign exchange gain for the three month period of $7million included in
the statement of comprehensive income relates to the translation differences
of foreign currency cash and cash equivalents balances and intercompany
balances denominated in currencies other than the functional currency of the
entity.
Impact of accounting standards to be applied in future periods
There are a number of standards and interpretations which have been issued by
the International Accounting Standards Board that are effective for periods
beginning subsequent to 31 December 2022 that the Group has decided not to
adopt early. The Group does not believe these standards and interpretations
will have a material impact on the financial statements once adopted.
4 Segmental reporting
The Group operates principally in the UK and Brazil, with operations managed
on a project-by-project basis within each geographical area. Activities in the
UK are mainly administrative in nature whilst the activities in Brazil relate
to exploration and evaluation work. The separate subsidiary responsible for
the project finance for the Araguaia Project is domiciled in the Netherlands.
The operations of this entity are reported separately and so it is recognised
as a new segment. The reports used by the chief operating decision-maker are
based on these geographical segments.
UK Brazil Total
2022 Netherlands
3 months 3 months 3 months 3 months
ended ended ended ended
31 March 2022 31 March 2022 31 March 2022 31 March 2022
US$ US$ US$ US$
Administrative expenses (1,690,374) (669,948) (20,664) (2,380,986)
Profit/(Loss) on foreign exchange 2,643,316 923,140 3,506,550 7,073,006
Loss before interest and tax per reportable segment 952,942 253,192 3,485,886 4,692,020
Net finance costs (88,376) (84,758) - (173,134)
Loss before taxation 864,566 168,434 3,485,886 4,518,886
Depreciation charges - 10,659 - 10,659
Additions to non-current assets - 36,323,595 - 36,323,595
Capitalisation of borrowing costs - 3,324,182 - 3,324,182
Foreign exchange movements to non-current assets - 14,708,194 - 14,708,194
Reportable segment assets 190,640,993 212,840,544 9,771,229 413,252,766
Reportable segment liabilities 72,890,851 13,938,634 77,137,551 163,967,036
UK Brazil Total
2021 Netherlands
3 months 3 months 3 months 3 months
ended ended ended ended
31 March 2021 31 March 2021 31 March 2021 31 March 2021
US$ US$ US$ US$
Administrative expenses (955,877) (174,883) (1,192) (1,131,952)
Change in fair value of special warrant liability (417,863) - - (417,863)
Profit/(Loss) on foreign exchange 180,483 - 74,073 254,556
Loss before interest and tax per reportable segment (1,193,257) (174,883) 72,881 (1,295,259)
Net finance costs (69,580) - - (69,580)
Loss before taxation (1,262,837) (174,883) 72,881 (1,364,839)
Depreciation charges - 3,968 - 3,968
Additions to non-current assets - 1,546,624 - 1,546,624
Capitalisation of borrowing costs - 1,994,712 - 1,994,712
Foreign exchange movements to non-current assets - (4,649,178) - (4,649,178)
Reportable segment assets 23,230,890 56,884,693 8,422,281 88,537,864
Reportable segment liabilities 17,619,777 334,033 32,107,556 50,061,366
5 Finance income and costs
3 months 3 months
ended ended
31 March 2022 31 March 2021
US$ US$
Finance income
- Interest income on cash and short-term deposits 623,056 39,054
Finance costs
- Interest on land purchases (33,736) -
- Contingent and deferred consideration: unwinding of discount (188,887) (135,964)
- Contingent and deferred consideration: Fair value adjustment 31,676 -
- Convertible loan note: unwinding of discount (40,041) -
- Amortisation of Royalty Finance (1,263,625) (1,082,762)
- Royalty finance carrying value adjustment (2,625,759) (884,620)
Total finance costs pre-capitalisation (3,497,316) (2,064,292)
Finance costs capitalised to the Araguaia mine development project 3,324,182 1,994,712
Net finance costs (173,134) (69,850)
6 Intangible assets
Intangible assets comprise exploration and evaluation costs and goodwill.
Exploration and evaluation costs comprise internally generated and acquired
assets.
Exploration and
Goodwill Exploration licences evaluation costs Software Total
US$ US$ US$ US$ US$
Cost
At 1 January 2021 215,979 6,831,692 1,442,670 - 8,490,341
Additions - 103,461 209,246 92,515 405,222
Amortisation for the year - - - (2,509) (2,509)
Exchange rate movements (14,844) (480,024) (88,701) - (583,569)
Net book amount at 31 December 2021 201,135 6,455,129 1,563,215 90,006 8,309,485
Additions - 57,770 159,577 - 217,347
Amortisation for the year - - - (5,455) (5,455)
Exchange rate movements 36,128 1,195,153 243,143 16,145 1,490,569
Net book amount at 31 March 2022 237,263 7,708,052 1,965,935 100,696 10,011,946
Impairment assessments for exploration and evaluation assets are carried out
either on a project-by-project basis or by geographical area.
7 Property, plant and equipment
Mine Development Property Vehicles and other field equipment Office equipment Land acquisition Total
US$ US$ US$ US$ US$
Cost
At 1 January 2021 41,909,101 105,074 78,287 119,090 42,211,552
Additions 13,328,811 759,475 69,980 10,199,425 24,357,691
Transfers - 648 (648) - -
Disposals - - (1,385) - (1,385)
Capitalised interest 7,073,241 - - - 7,073,241
Exchange rate movements (2,893,576) (7,206) (5,368) (8,185) (2,914,335)
At 31 December 2021 59,417,577 857,991 140,866 10,310,330 70,726,764
Additions 36,057,698 - 46,474 2,076 36,106,248
Transfers 861,137 (895,707) 34,570 - -
Capitalised interest 3,324,182 - - - 3,324,182
Disposals - - (1,593) - (1,593)
Exchange rate movements 11,212,831 153,903 25,268 1,849,422 13,241,424
At 31 March 2022 110,873,425 116,187 245,585 12,161,828 123,397,025
Accumulated depreciation
At 1 January 2021 - 78,036 42,719 - 120,755
Charge for the year - 7,526 12,840 - 20,366
Transfer - 222 (222) - -
Disposals - - (168) - (168)
Exchange rate movements - (5,350) (2,929) - (8,279)
At 31 December 2021 - 80,434 52,240 - 132,674
Charge for the period - 2,191 8.467 - 10,658
Disposals - - (133) - (133)
Exchange rate movements - 14,428 9,370 - 23,798
At 31 March 2022 - 97,053 69,944 - 166,997
-
Net book amount as at 31 March 2022 110,873,425 19,134 175,641 12,161,828 123,230,028
Net book amount as at 31 December 2021 59,417,577 777,557 88,626 10,310,330 70,594,090
In December 2018, a Canadian NI 43-101 compliant Feasibility Study ("FS') was
published by the Company regarding the enlarged Araguaia Project which
included the Vale dos Sonhos deposit acquired from Glencore.
The financial results and conclusions of the FS clearly indicate the economic
viability of the Araguaia Project with an NPV of $401M using a nickel price of
$14,000/t Ni. Nothing material had changed with the economics of the FS
between the publication date and the date of this report and the Directors
undertook an assessment of impairment for the 2021 audited financial
statements through evaluating the results of the FS along with recent market
information relating to capital markets and nickel prices and judged that
there are no impairment indicators with regards to the Araguaia Project. Since
then, no impairment indicators have been identified.
8 Share Capital and Share Premium
Issued and fully paid Number of shares Ordinary shares Share premium Total
US$ US$ US$
At 1 January 2022 3,802,365,590 52,215,236 247,847,561 300,062,797
Issue of equity - - - -
Issue costs from December 2021 equity issue - - (2,459,459) (2,459,459)
At 31 March 2022 3,802,365,590 52,215,236 245,388,102 297,603,338
9 Contingent and Deferred Consideration
Contingent Consideration payable to Xstrata Brasil Mineração Ltda.
The contingent consideration payable to Xstrata Brasil Mineração Ltda for
the acquisition of the Araguaia project has a carrying value of $2,347,450 at
31 March 2022 (31 December 2021: $2,308,612). It comprises US$5,000,000
consideration in cash as at the date of first commercial production from the
'Vale dos Sonhos' resource areas within the Enlarged Project area. The key
assumptions underlying the treatment of the contingent consideration the
US$5,000,000 and a discount factor of 7.0% along with the estimated date of
first commercial production.
During 2020 the Araguaia project entered the development phase and as a result
borrowing costs including unwinding of discount on contingent consideration
for qualifying assets have been capitalised to the mine development asset. The
borrowing costs capitalised for the three months to 31 March 2022 is $38,838
(31 March 2021: $66,385).
Contingent Consideration payable to Vale Metais Basicos S.A.
The contingent consideration payable to Vale Metais Basicos S.A. for the
acquisition of the Vermelho project has a carrying value of $4,499,972 at 31
March 2022 (31 December 2021: $4,425,522). It comprises US$6,000,000
consideration in cash as at the date of first commercial production from the
Vermelho project and was recognised for the first time in December 2019,
following the publication of a PFS on the project. The key assumptions
underlying the treatment of the contingent consideration of US$6,000,000 is a
discount factor of 7.0% along with the estimated date of first commercial
production.
As at 31 March 2022, there was a finance expense of $74,450 (31 March 2021:
$69,580) recognised in finance costs within the Statement of Comprehensive
Income in respect of this contingent consideration arrangement, as the
discount applied to the contingent consideration at the date of acquisition
was unwound. The finance costs in respect of this contingent consideration are
expensed as the Vermelho project has not entered the construction phase.
Deferred Consideration payable to Companhia Brasileira de Alumínio
The deferred consideration payable to Companhia Brasileira de Aluminio has a
carrying value of $5,519,461 at 31 March 2022 (31 December 2021: $5,475,538).
It comprises US$7,000,000 consideration in cash for ferronickel processing
equipment which payable on the completion of certain milestones in the
Araguaia project and was recognised for the first time in December 2021. The
milestones are as follows:
a) US$600,000 payable on execution of the Agreement, this was paid on
9 December 2021;
b) US$950,000 upon the removal of 80% of the Processing Equipment from
CBA's Niquelândia operations;
c) US$950,000 upon reaching 50% completion of Araguaia plant
construction;
d) d) US$1,150,000 upon production at Araguaia reaching 90% of
nameplate capacity for a period of 60 days, on average, and with up to 50% of
such amount payable in Horizonte shares, at Horizonte's election; and
e) e) US$3,350,000 payable by Horizonte in three equal annual
instalments with the first instalment due within 45 days of the first sale of
ferronickel to a third party. Horizonte may choose to pay the outstanding
balance of this amount at any time of its choosing with up to 50% of the total
able to be paid in Horizonte's shares, at Horizonte's election.
The key assumptions underlying the treatment of the deferred consideration is
a discount factor of 7.0% and the estimated timing of the milestones as
outlined previously.
As at 31 March 2022, there was a finance expense of $75,600 (31 March 2021:
$nil) recognised in finance costs within the Statement of Comprehensive Income
in respect of this deferred consideration arrangement, as the discount applied
to the deferred consideration at the date of acquisition was unwound.
Companhia Brasileira de Aluminio Xstrata Brasil Mineração Ltda (in respect of Araguaia project) Vale Metais Basicos S.A. (in respect of Vermelho project) Total
(in respect of Araguaia project)
US$ US$ US$ US$
At 1 January 2021
Initial recognition 5,450,087 3,946,090 4,136,002 13,532,179
Unwinding of discount 19,256 276,226 289,520 585,002
Change in estimate - (1,913,705) - (1,913,705)
Change in carrying value and foreign exchange 6,195 - (1) 6,194
At 31 December 2021 5,475,538 2,308,611 4,425,521 12,209,670
Unwinding of discount 75,600 38,838 74,450 188,887
Change in carrying value and foreign exchange (31,677) - 2 (31,676)
At 31 March 2022 5,519,461 2,347,449 4,499,973 12,366,883
10 a) Royalty Financing liability
10 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. At the current period end the rate has been estimated 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 2021.
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 $16,945 t/Ni to $17,756 t/Ni. The royalty rate has
remained at 2.95%.
Management have sensitised the carrying value of the royalty liability by a
change in the royalty rate to 3% (maximum royalty rate in the agreement) and
it would be $819,864 higher/lower and for a $1,000/t Ni increase/decrease in
future nickel price the carrying value would change by $2,808,916.
10 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. 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 10 b). 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 19.34%. 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 19.34%. 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 assumption influencing the
initial valuation of the carrying value of the Vermelho royalty is the long
term nickel price of $17,756 t/Ni, the long term cobalt price of $53,355t/Co
and the royalty rate of 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 $2,053,999 higher/lower
and for a $1,000/t Ni increase/decrease in future nickel price and future
cobalt price the carrying value would change by $1,459,331.
Araguaia Royalty valuation Vermelho Royalty valuation Total
US$ US$ US$
Net book amount at 1 January 2021 30,131,755 - 30,131,755
Unwinding of discount 4,637,057 - 4,637,057
Change in carrying value 9,727,692 - 9,727,692
Effects of foreign exchange - - -
Net book amount at 31 December 2021 44,496,504 - 44,496,504
Initial recognition - 25,000,000 25,000,000
Embedded derivative - initial valuation - 4,590,000 4,590,000
Transaction costs - (847,939) (847,939)
Unwinding of discount 1,249,391 14,233 1,263,624
Change in carrying value 2,626,069 (309) 2,625,760
Effects of foreign exchange - - -
Net book amount at 31 March 2022 48,371,964 28,755,985 77,127,949
10 b) Derivative financial assets
10 b.1) Araguaia derivative financial assets
The aforementioned Araguaia royalty agreement includes several options
embedded within the agreement as follows:
· If there is a change of control of the Group and the start of
major construction works (as defined by the expenditure of in excess of $30m
above the expenditure envisaged by the royalty funding) is delayed beyond a
certain pre agreed timeframe the following options exist:
o Call Option - which grants Horizonte the option to buy back between 50 -
100% of the royalty at a valuation that meets certain minimum economic returns
for OMF;
o Make Whole Option - which grants Horizonte the option to make payment as
if the project had started commercial production and the royalty payment were
due; and
o Put Option - should Horizonte not elect for either of the above options,
this put option grants OMF the right to sell between 50 - 100% of the Royalty
back to Horizonte at a valuation that meets certain minimum economic returns
for OMF.
· Buy Back Option - At any time from the date of commercial
production, provided that neither the Call Option, Make Whole Option or the
Put Option have been actioned, Horizonte has the right to buy back up to 50%
of the Royalty at a valuation that meets certain minimum economic returns for
OMF.
The directors have undertaken a review of the fair value of all of the
embedded derivatives and are of the opinion that the Call Option, Make Whole
Option and Put Option currently have immaterial values as the probability of
both a change of control and project delay are currently considered to be
remote. There is considered to be a higher probability that the Group could in
the future exercise the Buy Back Option and therefore has undertaken a fair
value exercise on this option.
The initial recognition of the Buy Back Option has been recognised as an asset
on the balance sheet with any changes to the fair value of the derivative
recognised in the income statement. It been fair valued using a Monte Carlo
simulation which runs a high number of scenarios in order to derive an
estimated valuation. The Monte Carlo simulation was performed at the 31
December 2021 year end.
The assumptions for the valuation of the Buy Back Option (per the Monte Carlo
simulation) are the future nickel price ($16,941/t Ni), the start date of
commercial production (May 2023), the prevailing royalty rate (2.95%), the
inflation rate (1.76%) and volatility of nickel prices (22.1%).
Sensitivity analysis
The valuation of the Buyback option is most sensitive to estimates for nickel
price and nickel price volatility.
An increase in the estimated future nickel price by $1,000 would give rise to
a $1,338,000 increase in the value of the option.
The nickel price volatilities based on both 5- and 10-year historic prices are
in close proximity and this is the period in which management consider that
the option would be exercised. Therefore, management have concluded that
currently no reasonably possible alternative assumption for this estimate
would give rise to a material impact on the valuation.
10 b.2) Vermelho derivative financial assets
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 been fair valued using a Monte Carlo
simulation which runs a high number of scenarios in order to derive an
estimated valuation. The Monte Carlo simulation was performed at the agreement
date of 23 November 2021.
The assumptions for the valuation of the Buy Back Option (per the Monte Carlo
simulation) are the future nickel price ($16,602/t Ni), the future cobalt
price ($45,387/t Co), the production profile from 2027 to 2065 , the expected
royalty rate (2.1%), the inflation rate (1.76%), volatility of nickel prices
(22.3%) and volatility of cobalt prices (28.0%).
Araguaia Royalty Vermelho Royalty Total
US$ US$ US$
Value as at 1 January 2021 2,400,000 - 2,400,000
Change in fair value 2,550,000 - 2,550,000
Value as at 31 December 2021 4,950,000 - 4,950,000
Initial recognition - 4,590,000 4,590,000
Value as at 31 March 2022 4,950,000 4,590,000 9,540,000
11 Convertible loan notes liability
On 29 March 2022 the Company issued convertible loan notes to the value of
$65 million at an interest rate of 11.75% with interest accruing quarterly in
arrears. The convertible loan notes were issued at a discount of 5.75%. The
maturity date of the instruments is 15 October 2032.
The convertible loan notes are unsecured and the noteholders will be repaid as
follows:
· Interest shall be capitalised until the Araguaia Project
Completion date, estimated to be 31 December 2025 (subject to various
technical operating tests being passed)
· After Project Completion Date, interest shall be paid quarterly
only if there is available cash (after the company meets its senior debt and
other senior obligations)
· After Project Completion Date, principal repayments (including
accrued capitalized interest) shall be paid quarterly subject to available
cash for distribution. In addition a cash sweep of 85% of excess cash will
apply on each interest payment date
· Any amount outstanding on the CLN on the maturity date 15 October
2032, Horizonte is obliged to settle in full on the maturity date.
At any time until the Maturity Date, the Noteholder may, at its option,
convert the notes, partially or wholly, into an amount of ordinary shares up
to the total amount outstanding under the Convertible Note divided by the
Conversion Price. The Conversion Price is 125% of the Subscription Price of
0.07 pence converted to US$ at a rate of 1.3493. The Conversion Price is
therefore $0.11806.
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. As the convertible loan notes was issued
close to the quarter end date, the fair value of the financial instrument
approximates the cash received.
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$2.5 million per trading day over
the prior 30 trading days; or
2. There is a change of control.
Management have assessed the likelihood of the above events occurring is
highly improbable and thus the value of the redemption right is immaterial and
was thus not considered in the valuation of the instrument.
Convertible loan notes liability
US$
Initial recognition 65,000,000
Discount on issue (3,737,500)
Transaction costs (2,347,041)
Unwinding of discount 40,041
Value as at 31 March 2022 58,955,500
12 Fair value
Carrying Amount versus Fair Value
The following table compares the carrying amounts versus the fair values of
the group's financial assets and financial liabilities as at 31 March 2022.
The group considers that the carrying amount of the following financial assets
and financial liabilities are
a reasonable approximation of their fair value:
· Trade receivables
· Trade payables
· Cash and cash equivalents
As at 31 March 2022 As at 31 December 2021
Carrying amount Fair Value Carrying amount Fair Value
US$ US$ US$ US$
Financial Assets 9,540,000 9,540,000 4,950,000 4,950,000
Derivative financial assets
Total Assets 9,540,000 9,540,000 4,950,000 4,950,000
Financial Liabilities
Contingent consideration 6,847,422 6,847,422 6,734,135 6,734,135
Deferred consideration 5,519,461 5,519,461 5,475,538 5,475,538
Royalty Finance 77,127,948 77,127,948 44,496,504 44,496,504
Convertible Loan Note liability 58,955,500 58,955,500 - -
Total Liabilities 148,450,331 148,450,331 56,706,177 56,706,177
Fair value Hierarchy
The level in the fair value hierarchy within which the financial asset or
financial liability is categorised is
determined on the basis of the lowest level input that is significant to the
fair value measurement.
Financial assets and financial liabilities are classified in their entirety
into only one of the three levels.
The fair value hierarchy has the following levels:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or
liabilities
Level 2- inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly, (i.e., as prices) or
indirectly (i.e., derived from prices)
Level 3- inputs for the asset or liability that are not based on observable
market data (unobservable inputs)
The derivative financial asset have been deemed to be a level three fair
value. Information related to the valuation method and sensitivities analysis
for the derivative financial asset are included in note 10 b.
13 Dividends
No dividend has been declared or paid by the Company during the three months
ended 31 March 2022 (2021: nil).
14 Earnings per share
The calculation of the basic earnings per share of 0.119 cents for the three
months ended 31 March 2022 (31 March 2021 loss per share: 0.09 cents) is based
on the gain attributable to the equity holders of the Company of $4,518,886
for the three month period 31 March 2022 (31 March 2021: $1,364,839 loss)
divided by the weighted average number of shares in issue during the period of
3,802,365,390 (weighted average number of shares for the three months ended 31
March 2021: 1,516,272,610).
Details of share options that could potentially dilute earnings per share in
future periods are disclosed in the notes to the Group's Annual Report and
Financial Statements for the year ended 31 December 2021 and in note 15 below.
15 Issue of Share Options
The Directors have discretion to grant options to the Group employees to
subscribe for Ordinary shares up to a maximum of 10% of the Company's issued
share capital. One third of options are exercisable at each six months
anniversary from the date of grant, such that all options are exercisable 18
months after the date of grant and all lapse on the tenth anniversary of the
date of grant or the holder ceasing to be an employee of the Group. Should
holders cease employment then the options remain valid for a period of 3
months after cessation of employment, following which they will lapse. Neither
the Company not the Group has any legal or constructive obligation to settle
or repurchase the options in cash.
There was no movement in share options during the three months ended 31 March
2022.
Number of options Weighted average exercise price
£
Outstanding at 1 January 2022 114,300,000 0.0425
Outstanding at 31 March 2022 114,300,000 0.0425
Exercisable at 31 March 2022 114,300,000 0.0425
16 Ultimate controlling party
The Directors believe there to be no ultimate controlling party.
17 Related party transactions
The nature of related party transactions of the Group has not changed from
those described in the Group's Annual Report and Financial Statements for the
year ended 31 December 2021. There were no significant related party
transactions during the three month period ended 31 March 2022.
18 Commitments
As at the date of these financial statements the Group is in the process of
concluding equipment purchase and service contracts which are key to the
commencement of the Araguaia project construction.
19 Events after the reporting period
None.
20 Approval of interim financial statements
These Condensed Consolidated Interim Financial Statements have been approved
for issue by the Board of Directors on 16 May 2022.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Except for statements of historical fact relating to the Company, certain
information contained in this press release constitutes "forward-looking
information" under Canadian securities legislation. Forward-looking
information includes, but is not limited to, the ability of the Company to
complete the acquisition of equipment as described herein, statements with
respect to the potential of the Company's current or future property mineral
projects; the ability of the Company to complete a positive feasibility study
regarding the second RKEF line at Araguaia on time, or at all, the success of
exploration and mining activities; cost and timing of future exploration,
production and development; the costs and timing for delivery of the equipment
to be purchased as described herein, the estimation of mineral resources and
reserves and the ability of the Company to achieve its goals in respect of
growing its mineral resources; the realization of mineral resource and reserve
estimates and achieving production in accordance with the Company's potential
production profile or at all. Generally, forward-looking information can be
identified by the use of forward-looking terminology such as "plans",
"expects" or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not anticipate",
or "believes", or variations of such words and phrases or statements that
certain actions, events or results "may", "could", "would", "might" or "will
be taken", "occur" or "be achieved". Forward-looking information is based on
the reasonable assumptions, estimates, analysis and opinions of management
made in light of its experience and its perception of trends, current
conditions and expected developments, as well as other factors that management
believes to be relevant and reasonable in the circumstances at the date that
such statements are made, and are inherently subject to known and unknown
risks, uncertainties and other factors that may cause the actual results,
level of activity, performance or achievements of the Company to be materially
different from those expressed or implied by such forward-looking information,
including but not limited to risks related to: the inability of the Company to
complete the acquisition of equipment contemplated herein, on time or at all,
the ability of the Company to complete a positive feasibility study regarding
the implementation of a second RKEF line at Araguaia on the timeline
contemplated or at all, exploration and mining risks, competition from
competitors with greater capital; the Company's lack of experience with
respect to development-stage mining operations; fluctuations in metal prices;
uninsured risks; environmental and other regulatory requirements; exploration,
mining and other licences; the Company's future payment obligations; potential
disputes with respect to the Company's title to, and the area of, its mining
concessions; the Company's dependence on its ability to obtain sufficient
financing in the future; the Company's dependence on its relationships with
third parties; the Company's joint ventures; the potential of currency
fluctuations and political or economic instability in countries in which the
Company operates; currency exchange fluctuations; the Company's ability to
manage its growth effectively; the trading market for the ordinary shares of
the Company; uncertainty with respect to the Company's plans to continue to
develop its operations and new projects; the Company's dependence on key
personnel; possible conflicts of interest of directors and officers of the
Company, and various risks associated with the legal and regulatory framework
within which the Company operates, together with the risks identified and
disclosed in the Company's disclosure record available on the Company's
profile on SEDAR at www.sedar.com (http://www.sedar.com) , including without
limitation, the annual information for of the Company for the year ended
December 31, 2021, the Araguaia Report and the Vermelho Report. Although
management of the Company has attempted to identify important factors that
could cause actual results to differ materially from those contained in
forward-looking information, there may be other factors that cause results not
to be as anticipated, estimated or intended. There can be no assurance that
such statements will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.
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