Harvest Mi (di) Regulatory News (HMI)

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

23 March 2018

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

Unaudited Interim Results

Harvest Minerals Limited, the AIM listed Brazilian fertiliser producer, is pleased to announce its unaudited interim results for the six month period ended 31 December 2017.

Highlights

· Focus on building sales of natural fertiliser from Company's Arapua project into large local market

o Post period end, signed first major deal with a key distributor of fertiliser in Brazil for an initial supply of 36Kt of KPfértil with a sales value of +US$2m

o Strong sales pipeline on back of expansion of sales team

· Verified significant advantages of KPfértil over traditional fertilisers for perennial crops

o Certification of KPfértil by MAPA as a remineraliser expected imminently

· Demonstrated strong project economics at Arapua

· Developing modular operations to expand production in line with sales - on track to complete Phase 1 plant expansion early Q2 2018 to bring capacity to 320Ktpa

· On the corporate side, successfully completed a placing of £1.2m in October 2017 and certain Board changes undertaken

Please refer to the Company's website for the full interim report, which will be uploaded shortly.

Chairman's Statement

Our focus during the period was on advancing the Arapua Project towards commercial production and developing a robust sales pipeline of KPfértil, our proven multi-nutrient fertiliser. Located in Brazil in the heart of the world's largest and fastest growing agricultural belt, this exciting project benefits from strong government support and compelling economics. It is now on the cusp of reaping the benefits of significant investment as commercial production come in sight. 

We set ourselves four targets during 2017: to complete all the required agronomic test work; to apply to register our product KPfértil with the Brazilian Ministry of Agriculture ('MAPA'); to achieve first sales; and to commission a modular processing plant to ensure that it is easy to expand production in line with sales. At the time, these appeared ambitious, but through the determination and hard work of all our team, I am very pleased to report all were achieved during 2H 2017.

The completion of all the required agronomic test works was particularly satisfying. Originally, we were told this would take 18 months, but through our proactive monitoring and engagement with all the agencies taking part, we were able to apply to MAPA in well under 12 months. Whilst, we will continue with further agronomic test work to assist our marketing efforts including our long-term coffee test work, all our agronomic studies to date indicate that KPfértil will work as both a remineraliser and a fertiliser. What is particularly exciting is that as it releases the nutrients slowly over time with very little lost due to leaching, it will outperform traditional fertilisers for perennial crops such coffee, sugar cane, grass, fruit trees and other forestry. As coffee and sugar cane are both major commercial crops close to our project, this is great news. The tests also suggest that grass, for which traditional fertilisers are unsuitable, could be a significant market for us with ~50% of all farmland in Brazil is used for raising cattle.

As the results began to come in, it was clear that KPfértil was a commercial product ideally suited to the Brazilian market. Therefore, in July we appointed a sales manager to develop the market and start selling KPfértil. We always thought that making any pre-registration sales would be difficult but, on the 12th October 2017, we were able to announce our first sales and continued to make further sales through to the end of November before halting sales for delivery this year to ensure we could produce and deliver the product on schedule.

As we began to get feedback from our marketing, it was decided to build and install a small modular plant on site rather than lease a mobile plant. This provided several advantages: we could begin to deliver against any sales we made; we could test the plant and associated infrastructure as well as recruit and train staff before ramping up production; and we could demonstrate a serious commercial operation to MAPA, DNPM, potential customers and investors. Fabrication of the plant started in early August and it was installed and commissioned by 6th October 2017, enabling us to deliver to our first customers. All the final infrastructure including the storage shed, water tanks and storage container was completed by early November 2017.

During this time, we raised £1.2m in an oversubscribed placing at 10p per share and I'd like to thank all our shareholders including our largest shareholder for their ongoing support. The funds raised are being used to progress the full mining licence application, further develop our rapidly growing sales channels, process additional stockpile, explore acquisition opportunities as well as for general working capital purposes.

Looking forward, 2018 is going to be another real step change for us as we focus on increasing our sales volumes and head towards commercial production. Receiving the registration for KPfértil from MAPA is expected to imminently, although our customers do not appear to be waiting for this; we signed our first major deal earlier in March 2018 with a key fertiliser distributor in Brazil, Agrocerrado Produtos Agrícolas e Assistência Técnica LTDA, for 36Kt of KPfértil, which has a sales value in excess of US$2m and we have a strong order book for the year. We announced in January 2018 a significant expansion for our processing plant to 320Ktpa, which will be completed in early Q2, and are actively expanding our sales and marketing team. We will also be submitting a full feasibility study and environmental report as part of the application for a full mining licence and continuing our agronomic testing, including the ongoing long-term test work on coffee, which is the major crop within 50km of the project. In the meantime, we continue to produce product under our trial mining licence.

We have come a long way in the last two years and I'd like to take the opportunity to again thank all our shareholders for their continued support and the dedication and perseverance of all our team.

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

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

Notes:

Harvest Minerals (HMI.L) is a Brazilian focused fertiliser producer advancing the 100% owned Arapua Fertiliser Project, which produces KPfértil, a proven, multi-nutrient, slow release, organic fertiliser and remineraliser. KPfértil offers many economic and agronomic benefits and addresses the significant demand for locally produced fertiliser in Brazil, with its abundant agricultural land; currently, the country imports 90% of the potash it uses but has a target to be self-sufficient in fertilisers by 2020. Covering 14,946 hectares and located in the heart of the Brazilian agriculture belt in Minas Gerais, Arapua is a shallow, low cost mine with an indicated and inferred resource of 13.07Mt at 3.1% K2O and 2.49% P2O5. This is based on drilling just 6.7% of the known mineralisation, leaving significant upside potential. This resource is equivalent over 29 years' production and the known mineralisation expected to support 100+ years' production at 450,000 tonnes per annum.

DIRECTORS' REPORT

The Directors of Harvest Minerals Limited and its subsidiaries ('Harvest', 'HMI' or 'the Company') submit the financial report of the Company for the half-year ended 31 December 2017. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:

Directors

The names of Directors who held office during or since the end of the half-year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.

Results

The loss after tax for the half-year ended 31 December 2017 was $833,508 (2016: $1,425,453).

Review of Operations

Arapua Fertiliser Project

Studies, Test Work and Sales

On 3 July 2017, the Company announced the results from ongoing agronomic work at its Arapua Fertiliser Project. Harvest reported that multiple soil incubation tests had been completed, which confirmed that the Company's remineraliser product, KPfértil, has positive agronomic efficiency. The results of such testing indicated that KPfértil works effectively as a multi-nutrient, slow release remineraliser and visual comparisons indicated that larger, healthier plants develop when KPfértil is applied. 

On 16 August 2017, the Company announced it had completed tests designed to determine if plants could use the nutrients in KPfértil when applied to the soil and compared these results with either no fertiliser or conventional fertilisers. These results continued to demonstrate that KPfértil works as a fertiliser and has a positive agronomic efficiency. 

On 5 September 2017, the Company announced that results of further tests conducted over 180 days on juvenile (±1.5 year) and mature (+12 year) coffee plants indicated that KPfértil is as effective as traditional fertilisers in supplying potassium ("K") and phosphate ("P") to plants. As part of the test, a total of 12 treatments were applied to compare KPfértil to conventional fertilisers as a source of K and P and results indicated that KPfértil acted as efficiently as imported Potassium Chloride ("KCI"), a conventional source of potassium. 

On 27 September 2017, the Company announced that it had submitted an application to register KPfértil as a remineraliser to the Brazilian Ministry of Agriculture, Livestock and Supply.

On 12 October 2017, the Company announced it had made its first sales of KPfértil after its initial testing, achieving pre remineraliser registration with customers including coffee growers, orchard and broad acre crop farmers.

On 22 November 2017, the Company announced positive leach test results for KPfértil. The test results demonstrated the superior behaviour of KPfértil over other traditional sources of potassium.

Infrastructure Work

On 12 October 2017, the Company announced that a modular processing plant had been fabricated and installed, completing a low-cost production chain whereby KPfértil can be milled and loaded into 1 tonne "big-bags" and picked up by the customer. The processing plant was designed such that further mills can be added to increase production capacity as the volume of order increases. The Company looks forward to transitioning from explorer to developer in the near future.

Other

In line with the Company's strategy to rapidly develop sales of KPfértil, the Company announced on 10 July 2017 the appointment of a new Brazilian based Sales Manager, Mr Lino Furia.

On 30 November 2017, the Company announced that the Federal Senate (Upper House of the National Congress of Brazil) approved a bill to reduce the royalty rates of fertiliser projects from 3% to 0.2%. The bill was approved by the Chamber of Deputies (lower house) on Wednesday 22 November 2017 and is part of wider reforms to boost the mining sector and the economy in general. This change will allow the Company to benefit significantly due to its low cost of production and forecast high production margin. The Company estimates cost savings of ~US$1.46/t at the Arapua Fertiliser Project.

As was disclosed in the Company's AIM Admission Document dated 2 September 2015 (the "Admission Document"), the Company is obliged to make a payment of US$1,000,000 at the commencement of commercial production in the areas of the mineral rights at Arapua. This payment was stated in the Admission Document as being due to RV2 Rio Verde Mineracao Ltda ("RV2"), which was the corporate vehicle incorporated to receive the payment on behalf of the previous owners of the mineral rights at Arapua, Fernando Pereira da Rocha Thomsen and Janine Tavares Camargo. As a result of a historical change in the transaction structure, this payment (when due) will be made directly to Fernando Pereira da Rocha Thomsen and Janine Tavares Camargo. The Company also updates that the mineral rights related to Arapua are held by its wholly owned subsidiary (save for one share), Triunfo Mineracao do Brasil Ltda, following the merger of its other wholly owned subsidiary (save for one share), Triunfo Fertilizantes & Mineracao Ltda, with Triunfo Mineracao do Brasil Ltda in September 2017.

Sergi Potash Project

On 23 July 2015, the Company announced that it had recorded a JORC (2012) Inferred Mineral Resource totalling 105.3MT grading 21.3% KCI, including all the sylvinite and carnallitite layers and using a cut-off grade of 13% KCI at its Sergi Potash Project. Given the scale of activity currently being undertaken at Arapua, the Company did not materially advance its Sergi Potash Project during the half-year period to 31 December 2017.

Capela Potash Project

Given the scale of activity currently being undertaken at Arapua, the Company did not materially advance its Capela Potash Project during the half-year period to 31 December 2017.

Mandacaru Phosphate Project

On 16 June 2016, the Company announced that the Mandacaru Phosphate Project contains a JORC (2012) compliant resource of 4.38 MT @ 4.55% P2O5, which includes an indicated resource of 1.47MT @5.30% P2O5 and an Inferred resource of 2.91 Mt @ 4.18% P2O5. The project has an estimated additional exploration potential of 4Mt of phosphate ore with similar grades, from the extension of the estimated mineralised layers, to be proven up by further exploration assessment. 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 31 December 2017.

Corporate Activity

Issue of Shares

On 25 October 2017, the Company issued 12,000,000 ordinary fully paid shares at 10p per share (the "Placing") to complete a fundraising of £1.2m (approximately A$ 2.1m).

Issue of Warrants

On 25 October 2017, in connection with the Placing, the Company issued the 600,000 warrants over ordinary shares with an exercise price of 10 pence expiring on 25 October 2019, to joint brokers of the Placing.

Appointment/Resignation of Directors

On 3 July 2017, the Company announced the appointment of Mr Jack James as a Non-Executive Director, and the resignation of Mr Mark Reilly as a Non-Executive Director.

On 4 October 2017, the Company announced the resignation of Mr Matthew Wood as an Executive Director, effective from 9 October 2017.

On 1 February 2018, the Company announced the appointment of Mr David Burton as a Non-Executive Director. On 19 March 2018, the Company announced the resignation of Mr Burton as a Non-Executive Director.

Auditor's Independence Declaration

Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the Directors of the company with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is set out on page 4 and forms part of the Directors' Report for the half-year ended 31 December 2017.

This report is signed in accordance with a resolution of the Board of Directors.

Brian McMaster

Chairman

22 March 2018

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 31 December 2017

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

Condensed Consolidated Statement of Financial Position

as at 31 December 2017

Condensed Consolidated Statement of Changes in Equity for the half-year ended 31 December 2017

Condensed Consolidated Statement of Cash Flows

for the half-year ended 31 December 2017

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

Notes to the Condensed Consolidated Financial Statementsfor the half-year ended 31 December 2017

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 31 December 2017 was authorised for issue in accordance with a resolution of the Directors on 22 March 2018.

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 31 December 2017 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 consolidated entity as the full financial statements.

It is recommended that the half-year financial statements be read in conjunction with the annual report for the year ended 30 June 2017 and considered together with any public announcements made by Harvest Minerals Limited during the half-year ended 31 December 2017 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).

New and amending Accounting Standards and Interpretations

In the half-year ended 31 December 2017, 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 annual reporting periods beginning on or after 1 July 2017.

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

The Directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the half-year ended 31 December 2017. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on the Group's business and, therefore, no change necessary to the Group's accounting policies.

Going Concern

This interim report has 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 report, for the half-years ended 31 December 2017 and 31 December 2016, the Group incurred losses of $833,508 and $1,425,453 respectively, net cash outflows from operating activities of $804,320 and $1,139,558 respectively, and net cash outflows from investing activities of $824,833 and $759,673 respectively.

The ability of the Group to continue as a going concern is dependent on a combination of a number of factors, the most significant of which is the ability of the 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 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 meaningful revenues.

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 Group does not continue as a going concern.

NOTE 2: SEGMENT REPORTING

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

NOTE 3: 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 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 $100,000 cash on 15 December 2017.

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 4: 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 5: ISSUED CAPITAL

Issued and paid up capital

Movements in ordinary shares on issue

Share Options

As at the date of this report, there were 3,355,125 unissued ordinary shares under options. The details of the options at the date of this report 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 options were exercised since the end of the half-year.

NOTE 6: SHARE BASED PAYMENTS

Share based payment transactions recognised during the period were as follows:

1Exploration expenditure

On 20 December 2016, 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 agreements. The fair value of the shares of $600,000 was determined by reference to the market value on the date the agreement.

2 Capital raising expenses

The table below summarises options granted to suppliers during the half-year ended 31 December 2017:

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

- Grant date share price: $0.212

- Risk-free interest rate: 1.5%

- Volatility: 110%

3Profit and loss

The table below summaries options granted to suppliers during the half-year ended 31 December 2016:

The options were 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%

NOTE 7: DIVIDENDS

No dividends have been paid or provided for during the half-year (2016: nil).

NOTE 8: CONTINGENT LIABILITIES AND COMMITMENTS

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

NOTE 9: SUBSEQUENT EVENTS

On 15 January 2018, the Company announced a substantial expansion of its operations at its 100% owned Arapua Fertiliser Project in Brazil. 

On 1 February 2018, the Company announced the appointment of Mr David Burton as a Non-Executive Director.

On 5 February 2018, the Company announced the approval of an incentivisation scheme for Executive Directors and Senior Management. Approval was given for the issue of 6,000,000 ordinary fully paid shares for nil consideration subject to the achievement of four performance conditions. In aggregate, 1,500,000 ordinary shares were issued to certain Executive Directors and Senior Managers on the basis that the first performance condition had been met and these ordinary shares were admitted to trading on AIM on 8 February 2018.

On 19 March 2018, the Company announced the resignation of Mr Burton as a Non-Executive Director.

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