Harvest Mi (di) Regulatory News (HMI)

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

30 September 2020

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

Shareholder Q&A

Harvest Minerals Limited, the AIM listed remineraliser producer, is pleased to provide answers to a number of recently asked shareholder questions in line with its shareholder engagement policy and commitment to maintaining market transparency.

1. Are the grades of material sufficient to maintain KPFértil remineraliser status for the next 30 years?

Yes, we have multi-decade mineral resources to ensure the long-term supply of our high quality remineraliser product and longevity of our business.

2. HMI is hopefully going to post a maiden profit this year. What does this mean? With all the expenses, wages, one off payments of $1m to the original vendor, taxes etc, will HMI's cash in the bank be more than at the end of the last FY?

In very simple terms, profit is defined as sales less than expenses incurred in generating those sales. What Harvest has said is that the ongoing all-in costs of operating the business are equivalent to approximately 40,000t of sales / annum and therefore annual sales above that level represent profit.

3. Will the board be willing to issue either a year-end sales target or perhaps a comparison to last year's sales at quarterly intervals? This would better reflect the buying season.

Please see the trading updates announced on 9 July 2020 and 30 September 2020.

4. We were told the new storage shed would be ready for the start of the sales season but have heard nothing since - is it now ready?

As per the announcement released on 22 September 2020, the expansion of the mining and product storage areas is in the final stage and due to be concluded by end of September 2020, ahead of the main buying season.

5. Does KPFértil improve carbon capture in the soil, and therefore make it even more attractive to buyers? Yes, KPFértil has a unique composition containing phosphate, potassium, calcium, magnesium, silicon and several micronutrients including manganese, copper, zinc, molybdenum, boron, and carbon. Its mineralogical composition contributes to the good development and productivity of crops and also helps in the maintenance and restitution of the soil nutrients. With a much lower cost compared to conventional fertilisers, soil remineralisers result in savings for the producer, allowing for an equal or even higher yield in crops compared to conventional fertilisers, whilst also improving the chemical and physical quality of the soil in a more balanced and sustainable way.

6. As a long term shareholder and investor with a longer term view in the Company, can you provide evidence that Q2 2020 performance is due to COVID-19 related issues? This would give me faith that when the virus passes, the longer-term future of the Company looks bright.

It is widely reported across international media the effects the pandemic has had, and continues to have, on Brazil. Despite this, and as per the trading update announced on 30 September 2020, we continue to have strong confidence in the strength of our business and quality of our KPFértil product, with a maiden profit imminent.

7. Why has the Company relentlessly spent the money raised in the last placing on expansion and production and storage when it is clear to everybody that sales were not increasing as expected?

The Company has continued to pursue the strategy laid out at the time of the capital raising and as sales continue to increase it is recognised that the investment in capacity is imperative to meet the demand in a timely fashion. Naturally, the development of the mine, production and storage capacity takes time and as such there was always an expectation that development would occur before sales rates would fully consume the capacity; this is common for most businesses.

8. Are the Edwards family selling as there is a never-ending number of shares being sold daily?

It is not appropriate for the Company to comment on individual shareholders. However, we note that in the event a major shareholder changes its holding by a material amount, it is required to notify the Company and we in turn notify the market.

9. The board has now said that that sales for the year will be affected by COVID-19. Will the board defer part of their salary this year in order that we can get through this situation, given that cash reserves are falling dramatically?

The remuneration of the board is a fixed remuneration and not aligned to trading performance. It is subject to discussion with the Company's NOMAD and Broker and was considered by the board to be appropriate earlier in 2020. The board and senior management have waived their entitlement to some short-term incentives, partly in recognition of the prevailing conditions.

10. The Company's market cap is £3.8 million as I now type. Clearly another placing would dilute shareholders value by 50%. The Company has always said funds are enough for the next two years, however, we are still due 1.4 million from debtors for last year's sales. Is the Company still satisfied that there are sufficient funds for the next two years?

Yes, we believe we have a healthy cash position; as per the trading update released on 30 September 2020, as at 30 September 2020 the unaudited cash balance was AUD$3,723,397 with a positive working capital position of approximately AUD$4,861,723.

11. How many tonnes per acre on average are recommended for coffee composting vs soy vs sugar cane etc?

Unfortunately, this is not that simple an answer to provide (due to soil conditions, weather, etc) and so I am unable to provide these comparative numbers.

12. Given the Company's current market cap, is the board ready to listen to offers for the Company as the future for the Company appears bleak given the current management's efforts?

We strongly refute these suggestions and firmly believe in the strength and longevity of the business and its value proposition.

13. Putting aside the disappointing sales figures (within a unique and difficult environment), as an investor it was beneficial to see the Company's targets for Q1 and Q2, alongside the respective sales figures. Is there any reason why the Company cannot provide a quarterly sales update as an RNS shortly after each period end? In addition, it would be useful to have comparative figures for the previous period included within these updates, rather than having to trawl through previous updates.

We are glad you found these helpful and as per the trading update announced on 30 September 2020, we are committed to continuing to provide trading updates in this manner. We hope to continue to provide similar updates quarterly.

14. Further to the above query, is there any reason why (when normality returns) a forecast target cannot be shared with investors going forward? On a previous Crux interview, there was some clear reluctance from management to commit to forecasting, but given the Company's current share price and apparent poor sentiment, there does not appear to be any particular downside to being open with current and prospective shareholders.

As per the response above, we hope to provide quarterly updates in the same manner as the recent trading updates.

15. In respect of H1 sales price, the sales revenue of $585,477 would appear to suggest an average sale price of $60.40 (based on 9,859 tonnes sold). However, for period-ending 31 December 2019, where approximately 50,000 tonnes were stated to have been sold, the average sale price would only be $28.87. Is there an explanation for this anomaly? Does this mean that product was heavily discounted, or buyers otherwise induced, or does this refer to issues relating to the Geociclio matter?

There has been no inducement or discounting (outside of very limited tolerance levels of immaterial amounts). The anomaly identified is caused by the accounting treatment of the contract with Agrocerado. Please refer to our financial statements for further information on this.

16. Investors have previously raised concerns of apparently high levels of director salaries and consultancy fees stated within the Company's accounts. Can we be provided with an explanation of this expenditure and be informed of how these will change going forward, giving mining licences and expansion plans have now been finalised. Additionally, although several cost-cutting measures have been disclosed, it would be advantageous to get details on any reductions in salaries/fees amongst the Board of Directors during the COVID-19 crisis.

As per question nine above, the remuneration of the board is a fixed remuneration and not aligned to trading performance. It is subject to discussion with the Company's NOMAD and Broker and was considered to be appropriate by the Board earlier in 2020. The board and senior management have waived their entitlement to some short-term incentives, partly in recognition of the prevailing conditions.

17. While I understand that the COVID-19 crisis has allowed listed companies further time to release accounts, I am struggling to understand, given the comprehensive numbers included in the latest update, as to why the Company has chosen to delay these? Given the investor sentiment, would it not be preferable to get perceived "bad news" released and digested rather than held back?

The delay was not the Company's choosing; it was a result of not being able to mobilise staff in Brazil to physically facilitate aspects of the audit in light of COVID-19 travel restrictions.

18. I note Mr Heyhoe has left his position with the Company and understand that the NOMAD advised that an RNS was not required. However, it would be good for investors to understand the succession plans for this position.

The role previously occupied by Dr. Heyhoe was considered important during the start-up and build-out of the operations. Going forward, as our operations are wholly domiciled in Brazil, our operational management team will primarily be based in Brazil. Currently we have a strong team in-country who are performing well.

19. This may appear to be a pedantic point, but it would be good if the Company were to be consistent with currency throughout all updates. Normal operating expenses are stated in AUD in the latest update, but the budget is referred to in USD. In a time where the Company is under considerable scrutiny, full and clear transparency will be a huge help going forwards.

The Company acknowledges this point. However, Harvest is an Australian company and subject to the Australian Corporations Act, which requires that it report in AUD whilst the operational currency of the Company is USD, hence the use of USD.

20. It would be hugely helpful to have an idea of the board's views on the direction of the Company moving forward. Yes, there have been considerable setbacks, some of which have been outside of the Company's control but is there still the enthusiasm within the board to turn the Company's fortunes around? Alternatively, do the board envisage a situation where the Company and/or operations may be put up for sale in a bid to secure a positive return for shareholders?

The Board wholeheartedly believes in the organic fertiliser space and the importance of its role in food production going forward. Additionally, the Board believes that KPFértil is an exceptional product and is the right product to take the Company forward. Consequently, we have strong confidence in the Company and its future growth and value prospects.

*ENDS*

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

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.