Harvest Mi (di) Regulatory News (HMI)

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

30 October 2020

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

Interim Results

Harvest Minerals Limited, the AIM listed remineraliser producer, is pleased to announce its unaudited interim results for the six-month period ended 30 June 2020.

REVIEW OF OPERATIONS

Arapua Fertiliser Project

Studies, Test Work and Sales

On 27 February 2020, Harvest announced that the Agência Nacional de Mineração ('ANM') (the agency which replaced the DNPM) granted a Concessão de Lavra or full mining permit for the Company's 100% owned Arapua Fertiliser Project ('Arapua' or 'the Project') in Brazil. This was the final step in fully permitting Arapua, granting the Company full permitting tenure over the asset. As set out in the original sale and purchase agreement, a payment of US$1m was made by the Company to the original vendors of the asset upon the granting of the full mining permit.

During the period, the Company also announced that it had commenced the expansion of the mining and product storage areas. The expansion work is largely complete and will provide for product storage capacity to be expanded by 300% to comprise a total of 30,000 tonnes of product within a 6,000m2 covered storage area and the mining area to be increased four-fold to 78.8km2 to provide greater production flexibility according to demand and reduce operating costs.

On 23 April 2020, the Company announced the results of the long term testwork conducted by Santinato & Santinato Cafés Ltda ('Santinato'), a renowned agronomic consulting company in Brazil specialising in coffee cultivation. Santinato has been conducting trials since 2017 on the suitability of KPfértil as a source of potassium ('K') and phosphate ('P') for coffee plants at one of the Veloso Agropecuária ('Veloso') coffee plantations in Minas Gerais State, Brazil. The trials consisted of two years of applying a potassium and phosphate fertiliser and a third final year of applying no additional source of potassium and phosphate (fertiliser suppression) to test the effectiveness of different sources of potassium and phosphate. All the soil fertility parameters were measured in May each year before the peak nutrient extraction by the plants for harvest between May and July in Brazil. All the biometric measurements were made just before the harvest and the productivity, maturation and income measurements were post-harvest.

In total, four experiments were conducted using the following sources of potassium and phosphate:

· T1 - Control - no additional sources of K and P applied

· T2 - Conventional sources - muriate of Potash (KCl) and Simple superphosphate (SSP) applied

· T3 - 100% KP KPfértil - applied to match the K2O applied in T2

· T4 - KP KPfértil and coffee straw (coffee husks from previous harvests - see figure 1) - applied to match 60% of K2O applied in T2 due to application of 5t/ha of coffee straw annually

The application rate of nutrients during each season was as follows:

· Year 1 (2017) - 350 kg / ha (N); 80 kg / ha (P2O5) and 200 kg / ha (K2O)

· Year 2 (2018) - 300 kg / ha (N); 80 kg / ha (P2O5) and 350 kg / ha (K2O)

· Year 3 (2019) - 300 kg / ha of N

· In the third year, no additional K or P was applied

The results of the trials confirmed that:

· KPfértil can be used to replace conventional fertilizers as a source of potassium and phosphate;

· Results in coffee are enhanced when used in association with coffee compost (coffee straw); and

· KPfértil increases the value of the coffee produced by increasing the proportion of the largest coffee cherries and yield.

During the period under review, the Company's operations were impacted by the effects of the COVID-19 pandemic (see discussion below), which impacted business confidence and the ability of the Company and its customers to trade unrestricted. Despite this, the Company made significant inroads towards developing and expanding its customer base and finished the period under review with a credible sales achievement. Although lower sales were achieved during the period to 30 June 2020 compared to the prior 6-month period, the Company has since recorded increased sales post balance date up to 30 September 2020.

Sergi & Capela Potash Projects

Given the scale of activity currently being undertaken at Arapua, the Company did not materially advance either of its Sergi or Capela Potash Projects during the half-year period to 30 June 2020.

Mandacaru Phosphate Project

Given the scale of activity currently being undertaken at Arapua, the Company did not materially advance its Mandacaru Phosphate Project during the half-year period to 30 June 2020.

Impact of COVID-19

On 31 January 2020, the World Health Organisation ('WHO') announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China ('COVID-19 outbreak') and the risks to the international community as the virus spread globally beyond its point of origin. Because of the rapid increase in exposure globally, on 11 March 2020, the WHO classified the COVID-19 outbreak as a pandemic.

The full impact of the COVID-19 outbreak continues to evolve at the date of this report.

Management is actively monitoring the global situation and its impact on the Group's financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Group is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for the 2020 financial year.

Brian McMaster

Executive Chairman

30 October 2020

Competent Person Statement

The technical information in this report is based on complied and reviewed data by Mr Paulo Brito BSc(geol), MAusIMM, MAIG. Mr Brito is a consulting geologist for Harvest Minerals Limited and is a Member of AusIMM - The Minerals Institute, as well as, a Member of Australian Institute of Geoscientists. Mr Brito has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Brito also meets the requirements of a qualified person under the AIM Note for Mining, Oil and Gas Companies and consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. Mr Brito accepts responsibility for the accuracy of the statements disclosed in this report.

Condensed Consolidated Statement of Comprehensive Income

for the half-year ended 30 June 2020

The accompanying notes form part of this half-year financial report.

Condensed Consolidated Statement of Financial Position

as at 30 June 2020

Condensed Consolidated Statement of Changes in Equity

for the half-year ended 30 June 2020

Condensed Consolidated Statement of Cash Flows

for the half-year ended 30 June 2020

Notes to the Condensed Consolidated Financial Statementsfor the half-year ended 30 June 2020

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Corporate Information

This general purpose half-year financial report of Harvest Minerals Limited (the "Company") and its subsidiaries (the "Group") for the half-year ended 30 June 2020 was authorised for issue in accordance with a resolution of the Directors on 30 October 2020.

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 principal activities of the Group are described in the Directors' Report.

Basis of Preparation

This financial report for the half-year ended 30 June 2020 has been prepared in accordance with the requirements of the Corporations Act 2001, applicable accounting standards including AASB 134 Interim Financial Reporting, Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board ("AASB"). Compliance with AASB 134 ensures compliance with IAS 134 "Interim Financial Reporting". The Group is a for profit entity for financial reporting purposes under Australian Accounting Standards.

These half-year financial statements do not include all notes of the type normally included within the annual financial statements and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the group as the full financial statements.

It is recommended that the half-year financial statements be read in conjunction with the annual report for the six months year ended 31 December 2019 and considered together with any public announcements made by Harvest Minerals Limited during the half-year ended 30 June 2020 in accordance with the continuous disclosure obligations of the AIM market.

For the purpose of preparing the interim report, the half-year has been treated as a discrete reporting period. The accounting policies and methods of computation adopted are consistent with those of the previous financial year and corresponding interim reporting period. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards (as adopted by the European Union).

In order to ensure the Company's reporting periods coincide with those of its industry peers, the Company elected to change its year-end from June 30 to December 31 resulting in the prior financial year of the Company being the six month period from 1 July 2019 to 31 December 2019. The six month period ended to 31 December 2019 has been used as the comparative for the half-year ended 30 June 2020.

New and amending Accounting Standards and Interpretations

In the half-year ended 30 June 2020, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Group's operations and effective for current reporting periods beginning on or after 1 January 2020. As a result of this review, no changes were necessary to Group accounting policies.

Significant Accounting Policies

Deferred Exploration and Evaluation 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.

Mine Properties

Mine properties represent the accumulation of all exploration, evaluation and development expenditure incurred in respect of areas of interest in which mining has commenced or is in the process of commencing. When further development expenditure is incurred in respect of mine property after the commencement of production, such expenditure is carried forward as part of the mine property only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production.

Amortisation is provided on a unit of production basis which results in a write off of the cost proportional to the depletion of the proven and probable mineral reserves.

The net carrying value of each area of interest is reviewed regularly and to the extent to which this value exceeds its recoverable amount, the excess is either fully provided against or written off in the financial year in which this is determined.

The Group provides for environmental restoration and rehabilitation at site which includes any costs to dismantle and remove certain items of plant and equipment. The cost of an item includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs when an item is acquired or as a consequence of having used the item during that period. This asset is depreciated on the basis of the current estimate of the useful life of the asset. In accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets the Group is also required to recognise as a provision the best estimate of the present value of expenditure required to settle this obligation. The present value of estimated future cash flows is measured using a current market discount rate.

Stripping costs

Costs associated with material stripping activity, which is the process of removing mine waste materials to gain access to the mineral deposits underneath, during the production phase of surface mining are accounted for as either inventory or a non-current asset (non-current asset is also referred to as a 'stripping activity asset').

To the extent that the benefit from the stripping activity is realised in the form of inventory produced, the Group accounts for the costs of that stripping activity in accordance with the principles of AASB 102 Inventories. To the extent the benefit is improved access to ore, the Group recognises these costs as a non-current asset provided that:

· it is probable that the future economic benefit (improved access to the ore body) associated with the stripping activity will flow to the Group;

· the Group can identify the component of the ore body for which access has been improved; and

· the costs relating to the stripping activity associated with that component can be measured reliably.

Stripping activity assets are initially measured at cost, being the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of ore plus an allocation of directly attributable overhead costs. In addition, stripping activity assets are accounted for as an addition to, or as an enhancement to, an existing asset.

Accordingly, the nature of the existing asset determines:

· whether the Group classifies the stripping activity asset as tangible or intangible; and

· the basis on which the stripping activity asset is measured subsequent to initial recognition

In circumstances where the costs of the stripping activity asset and the inventory produced are not separately identifiable, the Group allocates the production stripping costs between the inventory produced and the stripping activity asset by using an allocation basis that is based on volume of waste extracted compared with expected volume, for a given volume of ore production.

Revenue

Revenue arises mainly from the sale of fertiliser. The Group generates revenue in Brazil. To determine whether to recognise revenue, the Group follows a 5-step process:

1. Identifying the contract with a customer

2. Identifying the performance obligations

3. Determining the transaction price

4. Allocating the transaction price to the performance obligations

5. Recognising revenue when/as performance obligation(s) are satisfied.

The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer.

In determining the amount of revenue and profits to record, and related statement of financial position items (such as contract fulfilment assets, capitalisation of costs to obtain a contract, trade receivables, accrued income and deferred income) to recognise in the period, management is required to form a number of key judgements and assumptions. This includes an assessment of the costs the Group incurs to deliver the contractual commitments and whether such costs should be expensed as incurred or capitalised.

Revenue is recognised either when the performance obligation in the contract has been performed, so 'point in time' recognition or 'over time' as control of the performance obligation is transferred to the customer.

For contracts with multiple components to be delivered such as fertiliser, management applies judgement to consider whether those promised goods and services are (i) distinct - to be accounted for as separate performance obligations; (ii) not distinct - to be combined with other promised goods or services until a bundle is identified that is distinct or (iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer.

Transaction price

At contract inception the total transaction price is estimated, being the amount to which the Group expects to be entitled and has rights to under the present contract. The transaction price does not include estimates of consideration resulting from change orders for additional goods and services unless these are agreed. Once the total transaction price is determined, the Group allocates this to the identified performance obligations in proportion to their relative stand-alone selling prices and recognises revenue when (or as) those performance obligations are satisfied.

For each performance obligation, the Group determines if revenue will be recognised over time or at a point in time. Where the Group recognises revenue over time for long term contracts, this is in general due to the Group performing and the customer simultaneously receiving and consuming the benefits provided over the life of the contract.

For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group's performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer. The Group applies the relevant output or input method consistently to similar performance obligations in other contracts.

When using the output method the Group recognises revenue on the basis of direct measurements of the value to the customer of the goods and services transferred to date relative to the remaining goods and services under the contract. Where the output method is used, in particular for long term service contracts where the series guidance is applied, the Group often uses a method of time elapsed which requires minimal estimation. Certain long term contracts use output methods based upon estimation of number of users, level of service activity or fees collected.

If performance obligations in a contract do not meet the over time criteria, the Group recognises revenue at a point in time. This may be at the point of physical delivery of goods and acceptance by a customer or when the customer obtains control of an asset or service in a contract with customer-specified acceptance criteria.

Disaggregation of revenue

The Group disaggregates revenue from contracts with customers by contract type, which includes only fertiliser as management believes this best depicts how the nature, amount, timing and uncertainty of the Group's revenue and cash flows.

Performance obligations

Performance obligations categorised within this revenue type include the debtor taking ownership of the fertiliser product.

Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition is accounted for as follows:

· Raw materials - purchase cost; and

· Finished goods - cost of direct materials and labour and an appropriate proportion of variable and fixed overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

NOTE 2: SEGMENT REPORTING

For management purposes, the Group is organised into one main operating segment, which involves mining exploration processing and sale of fertiliser. 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. Revenue earned by the Group is generated in Brazil and all of the Group's non-current assets reside in Brazil.

The following table present revenue and loss information and certain asset and liability information regarding business segments for the half year ended 30 June 2020.

NOTE 3: REVENUE FROM CONTRACTS WITH CUSTOMERS

The Group derives its revenue from the sale of goods at a point in time in the major category of Fertiliser.

NOTE 4: COST OF GOODS SOLD

NOTE 5: TRADE AND OTHER RECEIVABLES

Trade debtors, other debtors and goods and services tax are receivable on varying collection terms. Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value. Some debtors are given industry standard longer payment terms which may cross over more than one accounting period. These trade terms are widely used in the agricultural market in Brazil and are considered industry norms.

1included in the debtors balance as at 30 June 2020 is an amount receivable of $684,955 from a third party, Agrocerrado Produtos Agricolas. In September 2020, the Company instigated legal proceedings to recover the debt. On 25 September 2020, the Tribunal de Justiça do Estado de Minas Gerais issued judgment against Agrocerrado Produtos Agricolas for the full amount of the debt plus costs. The Company is now taking steps to enforce the judgment. The Company considers the amount to be fully recoverable and as such, no impairment has been made.

NOTE 6: MINE PROPERTIES

NOTE 7: DEFERRED EXPLORATION AND EVALUATION EXPENDITURE

Exploration and evaluation phase:

1As announced on the AIM on 20 April 2015 Harvest acquired a 100% interest in the Sergi Potash Project in 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, is a payment of $200,000 cash on 13 February 2020.

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.

NOTE 8: 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.

NOTE 9: ISSUED CAPITAL

Issued and paid up capital

Movements in ordinary shares on issue

NOTE 10: PLANT AND EQUIPMENT

During the period under review, the Company continued with production to generate sales through its operating mine. The acquisitions of plant and equipment totalled $nil (6 months to 31 December 2019: $1,362).

NOTE 11: DIVIDENDS

No dividends have been paid or provided for during the half-year (6 months to 31 December 2019: $nil).

NOTE 12: CONTINGENT LIABILITIES AND COMMITMENTS

There has been no material change in contingent liabilities or commitments since the last annual reporting date.

NOTE 13: SUBSEQUENT EVENTS

There have been no other known significant events subsequent to the end of the period that require disclosure in this report.

**ENDS**

Enquiries:

Notes

Harvest Minerals Limited (HMI.L) is an AIM-quoted low-cost and high margin Brazilian remineraliser producer, located in the heart of the largest and fastest growing fertiliser market in Brazil.

Our product, KPFértil, is a registered and approved organic multi-nutrient direct application fertiliser. It contains many of the essential nutrients and minerals required by plants and, unlike most fertilisers, it does not require any complex processing or chemically alteration, instead it can be applied directly to crops.

KPFértil is produced at the wholly owned Arapua project, that consists of a fully permitted mine, production and storage facilities able to produce and deliver KPFértil to customers. Known mineralisation at the Project is expected to support 100+ years' production at 450Ktpa.

Our focus now remains on growing our business and we have the dedicated in-country sales and marketing team with the skills, experience and contacts to sell KPFértil into the potential multi-Mtpa market on the doorstep of the Project.