Harvest Mi (di) Regulatory News (HMI)

Harvest Minerals Limited / Index: LSE / Epic: HMI / Sector: Mining

28 September 2017

Harvest Minerals Limited ("Harvest" or the "Company")

FY 2017 Audited Annual Results

Harvest Minerals Limited, the AIM listed fertiliser development company, is pleased to announce its final audited annual results for the year ended 30 June 2017. The Company's annual report and accounts will be posted to shareholders shortly and uploaded to the Company's website.

Overview

· Focussed on building a leading fertiliser business to take advantage of strong market fundamentals, in particular the announcement from the Brazilian Government that it has set a target to be self-sufficient in fertilisers by 2020

· Advancing the Arapua multi-nutrient direct application natural fertiliser project, located in the heart of the Brazilian agriculture belt in Minas Gerais state

· Current resource of over 13Mt, achieved from 6.7% of identified resource, giving the project a +30-year mine life at a rate of 450k tonnes per annum

· Application for a full mining concession underway - rolling four-year Trial Mining License in place, which facilitates the Company's current production

· Multiple agronomy trials demonstrate that KPfértil works as a fertiliser and has a positive agronomic efficiency

· Focus on gaining certification of KPfértil as a remineraliser - application submitted and a positive initial response received from the Brazilian Ministry of Agriculture, Livestock and Supply

· Strong sales team and local sales pipeline - sales expected in Q4 2017, ramping up once certification achieved

· Continue to review other projects that fit investment criteria and utilise Board's extensive experience in the sector

For further information please visit www.harvestminerals.net or contact:

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

Chairman's Statement

I am pleased to provide an update on our recent activity and outline our plans for the future. Harvest remains focussed on building a leading fertiliser business to take advantage of strong market fundamentals, given Brazil's increasing reliance on fertiliser and its stated target to be self-sufficient in fertilisers by 2020; it currently imports 90% of the potash it uses. To this end, we continue to progress the advanced Arapua multi-nutrient direct application natural fertiliser ('DANF') project ('Arapua'), located in the heart of the Brazilian agriculture belt in Minas Gerais.

Arapua has a current resource of over 13Mt at 3.1% K2O and 2.49% P2O5, achieved from only 6.7% of identified resource, which translates into a mine life of over 30 years at a rate of 450k tonnes per annum. With its established infrastructure and local market, proven sales team and product ready for delivery, the foundations are in place for a robust business.

Currently, the Company has a rolling four-year Trial Mining License allowing Harvest to extract 50kt of Arapua's product, KPfértil, on a rolling basis. However, the Company is in the process of applying for a full mining concession; as part of this process, in April 2017, the Company submitted a Final Exploration Report on Arapua to the National Department of Mineral Production ('DNPM'), which detailed all the geological, metallurgical and agronomic work completed to date. The DNPM continues to consider the report and once approved, the Company has up to a year to submit a feasibility study and environmental report as the final steps in the application process for the full mining licences. Once granted, Harvest will be obliged to pay US$1 million to the third-party vendors of the Arapua project and therefore, we intend to utilise the full period available to submit the remaining reports. For the avoidance of doubt, whilst this process is ongoing, production from Arapua can continue pursuant to the trial mining license unabated.

Our focus remains on gaining certification and developing sales channels. In line with this, the Company has submitted an application for certification of KPfértil as a remineraliser to the Brazilian Ministry of Agriculture, Livestock and Supply ('MAPA'). KPfértil is an organic, multi-nutrient, slow-release fertiliser and remineraliser produced from a weathered potassium and phosphate rich lava, which offers many economic and agronomic benefits.

As part of the certification process, the Company has undertaken multiple agronomy trials, conducted by three organisations: The Federal University of Varginha; The Institute of Agricultural Research of Cerrado; and The Federal University of Uberlandia. These tests include:

· Chemical and physical analysis - to confirm the product meets minimum specifications and that it is not hazardous;

· Kinetic studies (incubation and leaching) - to demonstrate the product is able to release nutrients into the soil and how quickly they are leached from the soil; and

· Agronomic efficiency test work (growth tests) - to demonstrate the nutrients can be utilised by plants and that the product works effectively as a remineraliser.

Results from tests undertaken to determine if plants could use the nutrients in KPfértil when applied to the soil and comparing these results with either no fertiliser or conventional fertilisers demonstrate that KPfértil works as a fertiliser and has a positive agronomic efficiency. Rice crops applied with KPfértil demonstrated a substantial increase in dry matter production: no fertiliser - from 3.98g per plant; conventional source of potassium ('KCI') - from 5.03g per plant; and KPfértil - up to 59.44g per plant. Compared to conventional sources potassium ('K') and phosphate ('P'), applying the same dose of K and P as KPfértil in clayey soils produced up to 73.09% of the dry matter produced using expensive, conventional fertilisers.

Similarly, tests conducted by Santinato & Santinato Cafés Ltda ('Santinato'), a renowned agronomic consulting company in Brazil specialising in coffee cultivation, at one of the Veloso Agropecuária coffee plantations, considered one of the largest coffee producers in the Brazilian Cerrado, indicate KPfértil as effective as traditional fertilisers in supplying potassium ("K") and phosphate ("P") to coffee plants.

A second cycle of agronomic growth tests on rice and beans is underway to test KPfértil on winter crops; we anticipate that the results, expected Q4 2017, will demonstrate the long-term benefits, of using KPfértil as a slow release fertiliser, to potential customers.

In accordance with MAPA regulations, the Company recently gave a presentation to MAPA representatives on KPfértil including the results of all the chemical, physical and agronomic tests conducted to date. This was warmly received and formal application was submitted to MAPA on Thursday 25th September. As part of the process, MAPA requested that a covered storage shed be constructed, which we are duly building. Harvest will provide any further results of the current test work to MAPA as requested and the entire registration process is expected to be complete by the end of 2017. This will be before the next buying season, which will greatly benefit our sales effort.

With regards to sales, the Company continues to advance off-take agreements. Post period end, in July 2017, we appointed a new Sales Manager, Mr Lino Furia, who has over 20 years' experience in the management of crop production and the development of new products and markets in Brazil. Having worked with several major fertiliser companies including Vale Fertilisers, Yara Fertilisers and Mosaic Fertilisers, as well as phosphate miner, Rio Verde Minerals, Lino's contacts in the sector are extensive and experience second to none. Naturally, his job will be made easier once KPfértil is certified as a remineraliser, however, we are delighted with his initial progress, which has seen him advance agreements with a large number of potential customers ranging from consumers, co-operatives, agricultural distributors and trade bodies; these efforts are expected to bear fruit imminently. Following feedback from potential customers, the Company purchased a crusher, which is now operating on site. Given the expected selling price of KPfértil, the Company expects that farmers will see tangible economic benefits in introducing KPfértil to their fertiliser rotation and that sales will rapidly gain traction during 2018.

Additionally, the Company has a portfolio of other projects including: the Sergi Potash Project, where high grade and economic zones of potash have been intercepted; the Capela Potash Project, where 3D seismic has identified the potential presence of salt layers at relatively shallow depths; and the Mandacaru Phosphate Project, which has a JORC (2012) compliant total resource of 4.38Mt @ 4.55% phosphorus. Whilst our focus is on advancing Arapua to fully operational status, these projects are on hold.

Looking ahead, we remain committed to developing our business and believe that the stars are lining up for us: we have the right commodity given continued global population growth that requires increased food production and therefore increased need for fertiliser; we are in the right location, given that Brazil, the largest agribusiness exporter, set to double by 2024, lacks domestic fertiliser and currently imports 90% of potash and 51% of its phosphate requirements; and this is the right time, given Arapua's location and its simple, low cost product with its +80% margin and excellent expansion potential.

I am confident that the foundations are in place for an extremely profitable business; subject to attaining certification, we anticipate national demand for our product to significantly increase and remain optimistic that Harvest will become a key player in the market. We also continue to review other projects that fit our investment criteria and would enable us to utilise our extensive experience in the sector. As we move forwards towards achieving our objectives, I would like to thank our entire team for their continued commitment and our shareholders for their ongoing support.

Brian McMaster

Chairman

28 September 2017

Consolidated Statement of Comprehensive Income for the year ended 30 June 2017

Consolidated Statement of Financial Position as at 30 June 2017

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

Consolidated Statement of Cash Flows for the year ended 30 June 2017

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

Consolidated Statement of Changes in Equity for the year ended 30 June 2017

Notes to the financial statements at and for the year ended 30 June 2017

1. Corporate Information

The financial report of Harvest Minerals Limited ("Harvest Minerals" or "the Company") and its controlled entities ("the Group") for the year ended 30 June 2017 was authorised for issue in accordance with a resolution of the Directors on 27 September 2017.

Harvest Minerals Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the AIM Market of the London Stock Exchange.

The nature of the operations and the principal activities of the Group are described in the Directors' Report.

2. Summary of Significant Accounting Policies

(a) Basis of Preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The Group is a for profit entity for financial reporting purposes under Australian Accounting Standards.

The financial report has been prepared on an accrual basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Material accounting policies adopted in preparation of this financial report are presented below and have been consistently applied unless otherwise stated.

The presentation currency is Australian dollars.

Going Concern

These financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business.

As disclosed in the financial statements, for the financial years ended 30 June 2016 and 30 June 2017, the Group incurred losses of $2,820,472 and $2,630,756 respectively. The Group had net cash outflows from operating activities of $2,323,066 (2016: $2,663,211) and net cash outflows from investing activities of $1,399,620 (2016: $806,353) for the year ended 30 June 2017. As at that date, the Group had net current assets of $1,232,144. The ability of the Company and Group to continue as going concerns is dependent on a combination of a number of factors, the most significant of which is the ability of the Company and Group to raise additional funds in the following 12 months from the date of signing the annual report.

The Directors are of the opinion that there are reasonable grounds to believe that the Company and Group will continue as a going concern, after consideration of the following factors:

§ The Group has the ability to scale down its operations in order to reduce costs, in the event that any capital raising or other funding raising activities are delayed or insufficient cash is available, to meet future expenditure commitments;

§ The Directors have reduced discretionary spending and have the ability to defer payment of Directors' fees or fees owing to Director related entities until the Company has sufficient funds;

§ The Company has been able to successfully raise additional funds through equity raisings in the past; and

§ The Group is progressing towards being able to sell its product to generate revenue.

In considering the above, the Directors have reviewed the Group's financial position and are of the opinion that the use of the going concern basis of accounting is appropriate as they believe the Group will be able to secure funds to meet the working capital needs of the Group.

There are a number of inherent uncertainties relating to the Group's future plans including but not limited to:

§ There is doubt as to whether the Company will be able to raise equity in the current market; and

§ There is doubt as to whether the Group would be able to secure any other sources of funding.

Accordingly, there is a material uncertainty that may cast significant doubt whether the Group will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

The financial report does not include any adjustments relating to the amounts or classification of recorded assets or liabilities that might be necessary if the Company and Group do not continue as a going concern.

(b) Parent entity information

In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 26.

(c) Compliance statement

The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

(d) New accounting standards and interpretations issued but not yet effective

The following applicable accounting standards and interpretations have been issued or amended but are not yet effective. These standards have not been adopted by the Group for the year ended 30 June 2017 and no change to the Group's accounting policy is required.

The Group has not elected to early adopt any new Standards or Interpretations.

(e) Changes in accounting policies and disclosures

In the year ended 30 June 2017, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period.

It has been determined by the Directors that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to Group accounting policies.

(f) Basis of Consolidation

The consolidated financial statements comprise the financial statements of Harvest Minerals Limited and its subsidiaries as at 30 June each year ('the Company').

Subsidiaries are all those entities (including special purpose entities) over which the Company has control. The Company controls an entity when the company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies.

In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-company transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is obtained by the Company and cease to be consolidated from the date on which control is transferred out of the Company.

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values.

The difference between the above items and the fair value of the consideration (including the fair value of any pre-existing investment in the acquiree) is goodwill or a discount on acquisition.

A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity transaction.

(g) Foreign Currency Translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Company's controlled entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The functional and presentation currency of Harvest Minerals Limited is Australian dollars. The functional currency of the overseas subsidiaries is Brazilian Reals.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. 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 the Statement of Comprehensive Income.

(iii) Group entities

The results and financial position of all the Company's controlled 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:

· 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;

· income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

· all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities are taken to foreign currency translation reserve.

When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences are recognised in the statement of comprehensive income, as part of the gain or loss on sale where applicable.

(h) Plant and Equipment

Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses.

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

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight-line basis over their useful lives to the Group commencing from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset Depreciation Rate

Plant and equipment 33% - 50%

Furniture, Fixtures and Fittings 10%

Computer and software 20%

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.

Derecognition

Additions of plant and equipment are derecognised upon disposal or when no further future economic benefits are expected from their use or disposal.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in the statement of comprehensive income.

(i) Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets of the Group and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in the statement of comprehensive income.

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss.

After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

(j) Exploration expenditure

Exploration and evaluation expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest. Such expenditure comprises net direct costs and an appropriate portion of related overhead expenditure, but does not include general overheads or administrative expenditure not having a specific nexus with a particular area of interest.

Each area of interest is limited to a size related to a known or probable mineral resource capable of supporting a mining operation.

Exploration and evaluation expenditure for each area of interest is carried forward as an asset provided that one of the following conditions is met:

· such costs are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale; or

· exploration and evaluation activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in relation to the area are continuing.

Expenditure which fails to meet the conditions outlined above is written off. Furthermore, the directors regularly review the carrying value of exploration and evaluation expenditure and make write downs if the values are not expected to be recoverable.

Identifiable exploration assets acquired are recognised as assets at their cost of acquisition, as determined by the requirements of AASB 6 Exploration for and Evaluation of Mineral Resources. Exploration assets acquired are reassessed on a regular basis and these costs are carried forward provided that at least one of the conditions referred to in AASB 6 is met.

Exploration and evaluation expenditure incurred subsequent to acquisition in respect of an exploration asset acquired is accounted for in accordance with the policy outlined above for exploration expenditure incurred by or on behalf of the entity.

Acquired exploration assets are not written down below acquisition cost until such time as the acquisition cost is not expected to be recovered.

When an area of interest is abandoned, any expenditure carried forward in respect of that area is written off.

Expenditure is not carried forward in respect of any area of interest/mineral resource unless the Group's rights of tenure to that area of interest are current.

(k) Trade and Other Receivables

Trade receivables, which generally have 30 - 90-day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.

(l) Cash and Cash Equivalents

Cash and cash equivalent in the statement of financial position include cash on hand, deposits held at call with banks and other short term highly liquid investments with original maturities of three months or less. Bank overdrafts are shown as current liabilities in the statement of financial position. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as described above and bank overdrafts.

(m) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money, and where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

(n) Trade and other payables

Liabilities for trade creditors and other amounts are measured at amortised cost, which is the fair value of the consideration to be paid in the future for goods and services received that are unpaid, whether or not billed to the Group.

(o) Income Tax

Deferred income tax is provided for on all temporary differences at balance date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes.

No deferred income tax will be recognised from the initial recognition of goodwill or of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

No deferred income tax will be recognised in respect of temporary differences associated with investments in subsidiaries if the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary differences will not reverse in the near future.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is charged or credited in the statement of comprehensive income except where it relates to items that may be charged or credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets and unused tax losses to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on tax rates (and tax laws) that have been enacted or substantially enacted at the balance date and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. The carrying amount of deferred tax assets is reviewed at each balance date and only recognised to the extent that sufficient future assessable income is expected to be obtained.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of comprehensive income.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

(p) Issued capital

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

(q) Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue is capable of being reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Interest income

Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.

(r) Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit / loss attributable to equity holders of the Company, excluding any costs of servicing equity other than dividends, by the weighted average number of ordinary shares, adjusted for any bonus elements.

Diluted earnings per share

Diluted earnings per share is calculated as profit / loss attributable to members of the Company, adjusted for:

· costs of servicing equity (other than dividends);

· the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

· other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares;

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus elements.

(s) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of GST/sales tax, except where the amount of GST/sales tax incurred is not recoverable from the relevant Tax Authority. In these circumstances, the GST/sales tax is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST/sales tax.

The net amount of GST/sales tax recoverable from, or payable to, the Tax Authority is included as part of receivables or payables in the statement of financial position.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which is receivable from or payable to the ATO, being disclosed as operating cash flows.

(t) Share based payment transactions

The Group provides benefits to individuals acting as, and providing services similar to employees (including Directors) of the Group in the form of share based payment transactions, whereby individuals render services in exchange for shares or rights over shares ('equity settled transactions').

There is currently an Employee Share Option Scheme (ESOS) in place, which provides benefits to Directors and individuals providing services similar to those provided by an employee.

The cost of these equity settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by using an option pricing formula taking into account the terms and conditions upon which the instruments were granted, as discussed in note 23.

In valuing equity settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Harvest Minerals Limited ('market conditions').

The cost of the equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award ('vesting date').

The cumulative expense recognised for equity settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the Directors of the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of the market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised at the beginning and end of the period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

Where the terms of an equity settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of the modification.

Where an equity settled award is cancelled, it is treated as if it had vested on the date of the cancellation, and any expense not yet recognised for the award is recognised immediately. However if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The cost of equity-settled transactions with non-employees is measured by reference to the fair value of goods and services received unless this cannot be measured reliably, in which case the cost is measured by reference to the fair value of the equity instruments granted. The dilutive effect, if any, of outstanding options is reflected in the computation of loss per share (see note 20).

(u) Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

(v) Operating segments

Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance.

(w) Fair value measurement

When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either in the principle market; or in the absence of a principal market, in the most advantageous market.

Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed each reporting date and transfers between levels are determined based on a reassessment of the lowest level input that is significant to the fair value measurement.

For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data.

(x) Critical accounting estimates and judgements

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

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Capitalised exploration and evaluation expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale.

Factors which could impact the future recoverability include the level of proved, probable and inferred mineral resources, future technological changes which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices and exchange rules.

To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, this will reduce profits and net assets in the period in which this determination is made.

In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent that it is determined in the future that this capitalised expenditure should be written off, this will reduce profits and net assets in the period in which this determination is made.

Share based payment transactions

The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black Scholes formula taking into account the terms and conditions upon which the instruments were granted, as discussed in note 23.

Functional currency translation reserve

Under Accounting Standards, each entity within the Group is required to determine its functional currency, which is the currency of the primary economic environment in which the entity operates. Management considers the Brazilian subsidiaries to be foreign operations with Brazilian Reals as the functional currency. In arriving at this determination, management has given priority to the currency that influences the labour, materials and other costs of exploration activities as they consider this to be a primary indicator of the functional currency.

3. Segment Information

For management purposes, the Group is organised into one main operating segment, which involves mining exploration. All of the Group's activities are interrelated, and discrete financial information is reported to the Board (Chief Operating Decision Makers) as a single segment.

 No revenue is derived from a single external customer.

Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole. Total revenue earned by the Group is generated in Australia and all of the Group's non-current assets reside in Brazil.

4. Consulting and Directors' Fees

5. Other Expenses

6. Income Tax

The benefit of the tax losses will only be obtained if:

(i) the Group derives future assessable income in Australia of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised, and

(ii) the Group continues to comply with the conditions for deductibility imposed by tax legislation in Australia and

(iii) no changes in tax legislation in Australia adversely affect the Group in realising the benefit from the deductions for the losses.

7. Cash and Cash Equivalents

Reconciliation of Cash and Cash Equivalents

Non-cash Investing and Financing Transactions

During the year ended 30 June 2017, the Company has issued shares to acquire assets. These transactions are described at note 11.

8. Trade and Other Receivables - Current

Trade debtors, other debtors and goods and services tax are non-interest bearing and generally receivable on 30-day terms. They are neither past due nor impaired. The amount is fully collectible. Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.

9. Investments in subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2(f).

10. Plant and Equipment

11. Deferred Exploration and Evaluation Expenditure

1 As announced on the ASX on 20 April 2015 Harvest acquired a 100% interest in the Sergi Potash Project in the Sergipe State, Brazil. The portion of consideration for this acquisition recorded during the period, as per the Sergi Project Mineral Rights Purchase and Sale Agreement, included the issue of 6,000,000 fully paid ordinary shares in the Company (valued at $600,000), and payment of $100,000 cash. 

The ultimate recoupment of costs carried forward for exploration expenditure is dependent on the successful development and commercial exploitation or sale of the respective mining areas.

12. Trade and Other Payables

Trade creditors, other creditors and goods and services tax are non-interest bearing and generally payable on 60-day terms. Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value.

13. Issued Capital

(c) Ordinary shares

The Company does not have authorised capital nor par value in respect of its issued capital. Ordinary shares have the right to receive dividends as declared and, in the event of a winding up of the Company, to participate in the proceeds from sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or proxy, at a meeting of the Company.

(d) Capital risk management

The Group's capital comprises share capital, reserves less accumulated losses amounting to $7,109,693 at 30 June 2017 (2016: $6,707,627). The Group manages its capital to ensure its ability to continue as a going concern and to optimise returns to its shareholders. The Group was ungeared at year end and not subject to any externally imposed capital requirements. Refer to note 21 for further information on the Group's financial risk management policies.

(e) Share options

As at balance date, there were 2,755,125 unissued ordinary shares under option.

The details of the options at balance date and movements in issued options since 1 July 2016 are as follows:

No option holder has any right under the options to participate in any other share issue of the Company or any other entity.

No other options were exercised during or since the end of the financial year.

14. Reserves

Movements in Reserves

The share based payment reserve is used to record the value of equity benefits provided to Directors and Executives as part of their remuneration and non-employees for their services. Refer to note 23 for further details of the options issued during the financial year.

The foreign exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve, as described in note 2(g). The reserve is recognised in the statement of comprehensive income when the net investment is disposed of.

15. Accumulated losses

16. Expenditure Commitments

(a) Rental and service agreements

The Group entered a service agreement for certain administrative services and office space for a term of three years starting in October 2014. The Group is required to give three months written notice to terminate the agreement.

(b) Exploration commitments

In order to maintain the current rights of tenure to mining tenements, the Group has certain committed exploration expenditure requirements and option payments. Elements of these obligations that are not provided for in the financial statements are due as follows:

These obligations have arisen as a result of certain acquisitions that were undertaken in prior years as summarised below.

Capela Potash Project

As announced on the ASX on 28 August 2014, Harvest acquired a 51% interest in the Capela Potash Project in the Sergipe State, Brazil from Kmine Holdings Ltd. Consideration for this acquisition per the Mineral Rights Purchase and Sale Agreement comprised:

a). Payment of $120,000 on execution of the acquisition agreement;

b). The issue of 40,000,000 fully paid ordinary shares in the Company at a price of $0.01 per share;

c). The issue of further shares in the Company to the value of $400,000 prior to 31 December 2014;

d). The issue of further shares in the Company to the value of $400,000, not before 31 December 2014, on the identification of 10 million tonnes of carnallite or sylvite with a minimum grade of 10% KCI;

e). The issue of further shares in the Company to the value of $800,000, not before 31 July 2015, on the identification of a JORC inferred reserve with the minimum of 25 million tonnes with a minimum grade of more than 10% of KCI;

f). The issue of further shares in the Company to the value of $1,000,000, not before 31 December 2015, if the Company completes a scoping study, feasibility study or another study that confirms the economic feasibility under the JORC Code;

g). Drill two (2) holes for a total of 700m.

The elements of the consideration noted at d). to g). have not been fulfilled as at 30 June 2017 and have therefore been recorded as commitments in note 16 (b) above. Harvest also has the option of acquiring the other 49% interest in the Project by the payment of $5,000,000 within three years after execution of the agreement, being 14 August 2017.

Sergi Potash Project

As announced on the ASX on 20 April 2015, Harvest acquired a 100% interest in the Sergi Potash Project in the Sergipe State, Brazil from Kmine Holdings Ltd. Consideration for this acquisition per the Heads of Agreement comprises:

a). Payment of $50,000 on execution of the acquisition agreement;

b). Payment of $50,000 on execution of definitive agreement, subject to due diligence;

c). On 31 December 2015 and 2016 payment of $100,000 and 60,000,000 (6,000,000 post consolidation) fully paid ordinary shares in the Company;

d). On 31 December 2017 to 2021 payment of $100,000 to Kmine Holdings Ltd;

e). On achieving minimum horizon of 10 meters of carnallite or sylvite with a minimum grade of 10%, payment of 60,000,000 fully paid ordinary shares in the Company;

f). On achieving a JORC inferred reserve with the minimum of 25 million tonnes with a minimum grade of more than 10% of KCl, payment of 60,000,000 (6,000,000 post-consolidation) fully paid ordinary shares in the Company;

g). On achieving a successful scope or feasibility study that confirms the economic feasibility under the JORC rules, payment of 60,000,000 (6,000,000 post-consolidation) fully paid ordinary shares in the Company; and

h). On commencing of commercial production, payment of $6,000,000 to Kmine Holdings Ltd.

The elements of the consideration noted at d)., g). and h). have not been fulfilled as at 30 June 2017 and have therefore been recorded as commitments as appropriate.

Arapua Fertilizer Project

As announced on the ASX on 5 September 2014, Harvest acquired a 100% interest in the Arapua Fertilizer Project in the State of Minas Gerais in Brazil. The salient terms of the acquisition are:

a). A total payment of US$1,000,000 at the commencement of commercial production; and

b). A Net Smelter Return Royalty to the vendors of 2%.

The elements of the consideration have not been fulfilled as at 30 June 2017 and have therefore been recorded as commitments in note 16(b) above, other than the 2% Net Smelter Return Royalty, which is difficult to quantify.

Mandacaru Phosphate Project

As announced on the ASX and AIM on 21 December 2015, Harvest acquired a 100% interest in the Mandacaru Phosphate Project in the Ceara State, Brazil. The salient terms of the acquisition are:

a). A Net Smelter Return Royalty to the vendors of 2%, capped at an aggregate amount of US$1,000,000.

The elements of the consideration have not been fulfilled as at 30 June 2017 and have therefore been recorded as commitments in note 16 (b) above.

If the Group decides to relinquish and/or does not meet the obligations, assets recognised in the Statement of Financial Position may require review to determine the appropriateness of carrying values. The sale, transfers or farm-out of exploration rights to third parties will reduce or extinguish the above obligations.

17. Auditor's Remuneration

18. Events Subsequent to Balance Date

On 3 July 2017, Mr Jack James was appointed to the Board as a Non-Executive Director. On the same date, Mr Mark Reilly resigned from his position on the Board.

There were no other known significant events from the end of the financial year to the date of this report.

19. Related Party Disclosures

The ultimate parent entity is Harvest Minerals Limited. Refer to note 9 for a list of all subsidiaries within the Group.

Gemstar Investments Limited, a company in which Mr McMaster is a director, is a personal services company into which Mr McMaster's Director fees are paid. Gemstar Investments Limited had $28,000 (2016: $nil) outstanding at year end.

Styletown Investments Pty Ltd, a company in which Mr Reilly is a director, is a personal services company into which Mr Reilly's Director fees are paid. Styletown Investments Pty Ltd had $6,970 (2016: $5,940) outstanding at year end.

FFA Legal Ltda, a company in which Mr Azevedo is a director, provided the Group with legal and accounting services in Brazil totalling $156,633 (2016: $160,156). No balance (2016: $10,411) was outstanding at year end.

Garrison Capital Pty Ltd, a company in which Mr McMaster and Mr Wood are directors and shareholders, had reimbursements of payments for minor expenses at cost totalling $1,796 (2016: $22,122). No balance (2016: $nil) was outstanding at year end.

These transactions have been entered into on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

20. Loss per Share

There is no impact from 2,755,125 options outstanding at 30 June 2017 (2016: 16,813,720 options) on the loss per share calculation because they are considered anti-dilutive. These options could potentially dilute basic EPS in the future. There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements.

21. Financial Risk Management

Exposure to interest rate, liquidity and credit risk arises in the normal course of the Group's business. The Group does not hold or issue derivative financial instruments.

The Group uses different methods as discussed below to manage risks that arise from these financial instruments. The objective is to support the delivery of the financial targets while protecting future financial security.

(a) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities.

The Group manages liquidity risk by maintaining sufficient cash facilities to meet the operating requirements of the business and investing excess funds in highly liquid short-term investments. The responsibility for liquidity risk management rests with the Board of Directors.

Alternatives for sourcing the Group's future capital needs include the cash position and the issue of equity instruments. These alternatives are evaluated to determine the optimal mix of capital resources for our capital needs. We expect that, absent a material adverse change in a combination of our sources of liquidity, present levels of liquidity along with future capital raising will be adequate to meet our expected capital needs.

Maturity analysis for financial liabilities

Financial liabilities of the Group comprise trade and other payables. As at 30 June 2017 and 30 June 2016 all financial liabilities are contractually maturing within 60 days.

(b) Foreign currency exchange rate risk

The Company holds cash balances in foreign currencies (Great British Pounds ('GBP') and United States Dollars ('USD')). The carrying amounts of the Group's foreign currency denominated cash balances are GBP (A$1,137,806) and USD (A$145,596).

Foreign currency sensitivity analysis

A 10% increase and decrease in the GBP and USD against the Australian dollar would lead to a $128,340 increase / decrease in profit (2016: $256,106) increase / decrease in profit).

(c) Interest rate risk

Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of financial instruments.

The Group's exposure to market risk for changes to interest rate risk relates primarily to its earnings on cash and term deposits. The Group manages the risk by investing in short term deposits.

Interest rate sensitivity

The following table demonstrates the sensitivity of the Group's statement of comprehensive income to a reasonably possible change in interest rates, with all other variables constant.

Consolidated

A sensitivity of 100 basis points has been used as this is considered reasonable given the current level of both short term and long term Australian Dollar interest rates. The change in basis points is derived from a review of historical movements and management's judgement of future trends. The analysis was performed on the same basis in 2016.

(d) Credit risk exposures

Credit risk represents the risk that the counterparty to the financial instrument will fail to discharge an obligation and cause the Group to incur a financial loss. The Group's maximum credit exposure is the carrying amounts on the statement of financial position. The Group holds financial instruments with credit worthy third parties.

At 30 June 2017, the Group held cash at bank. These were held with financial institutions with a rating from Standard & Poors of -AA or above (long term). The Group has no past due or impaired debtors as at 30 June 2017 (2016: nil).

(e) Fair value of financial instruments

The carrying amounts of financial instruments approximate their fair values.

(f) Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. There were no changes in the Group's approach to capital management during the year. The Group is not subject to externally imposed capital requirements.

22. Contingent Liabilities

There are no known contingent liabilities at as at 30 June 2017 and 30 June 2016.

23. Share Based Payments

Share based payment transactions recognised either as operating expenses in the statement of comprehensive income, exploration expenditure on the statement of financial position or capital raising expenses in equity during the year were as follows:

Exploration expenditure

During the financial year 6,000,000 shares were issued to Kmine Holdings Ltd as part of the agreed terms of acquisition in relation to the Sergi Potash Project agreement. The fair value of the shares of $600,000 was determined by reference to the market value on the Australian Securities Exchange on the date the agreement.

Capital raising expenses

The table below summaries options granted to suppliers during the year:

The options have been valued using the Black & Scholes option pricing model with inputs noted in the above table and further inputs as follows:

- Grant date share price: $0.2483

- Risk-free interest rate: 1.5%

- Volatility: 110%

Profit and loss

The table below summaries options granted to suppliers during the year:

The options have been valued using the Black & Scholes option pricing model with inputs noted in the above table and further inputs as follows:

- Grant date share price: $0.3577

- Risk-free interest rate: 1.5%

- Volatility: 110%

24. Dividends

No dividend was paid or declared by the Group in the period since the end of the financial year and up to the date of this report. The Directors do not recommend that any amount be paid by way of dividend for the year ended 30 June 2017.

The balance of the franking account is Nil as at 30 June 2017 (2016: Nil).

25. Key management personnel disclosure

Details of the nature and amount of each element of the emoluments of the key management personnel of the Group for the financial year are as follows:

26. Parent Entity Information

The following details information related to the parent entity, Harvest Minerals Limited, at 30 June 2017. The information presented here has been prepared using consistent accounting policies as presented in note 2.