Harvest Mi (di) Regulatory News (HMI)

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

2 December 2019

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

Trading Update

Harvest Minerals Limited, the AIM listed remineraliser producer, is pleased to provide a trading update on its Arapua Project ('Arapua') located in the heart of the Brazilian agricultural belt in Minas Gerais, which produces KPFértil, a multi-nutrient direct application natural remineraliser product.

Highlights

·; Sales for past 12 months are ~50Kt, equivalent to breakeven at profit before tax level

·; Sales price maintained at approximately BRL200 per tonne (US$48/t allowing for variations caused by exchange rate movements)

·; Aiming to record maiden profit before tax for CY2020

·; Continuing to increase capacity to meet expected future demand

·; Cost savings programme implemented to further improve performance

Brian McMaster, Executive Chairman of Harvest stated, "Having launched KPFértil just 12 months ago, we are delighted to report that we will close the year at breakeven at the profit before tax level. Given this progress and as we continue to build confidence in the product and grow our sales run-rate, we aim to see a maiden profit before tax in 2020.

2019 has been a busy time. There is still a lot of hard work to be done with many more potential customers to meet and entice and costs to be tackled. Our progress and the speed of implementation is a credit to the hardworking Harvest team and to the continued support of our investors - thank you."

Full Details

Harvest has today released its full year audited financial statements and annual report for the year ended 30 June 2019 ("Full Year Accounts"). As announced on 17 October 2019, the Company has changed its accounting reference date to 31 December following publication of the Full Year Accounts to align its financial calendar with the production and sales cycles that work predominately on a calendar basis.

The Full Year Accounts show an accounting loss at the profit after tax level. This result is driven by the cut off timing of 30 June and the crossover against the production/selling season as well as the one off costs associated with developing the business. Recording an accounting loss at this stage was expected and is consistent with Harvest's overall development plan.

The sale of KPFértil, commenced in earnest at the end of CY Q4 2018. Accordingly, an appropriate measure of performance is year-on-year sales not impacted by accounting cut-off dates. Current sales for the past 12 months are 47.5Kt and our pipeline of confirmed orders for the rest of the calendar year will take total sales to above 50kt.

The Company's total annualised costs, excluding one-off costs, are currently approximately US$2.4m. The average sales price of KPFértil is BRL200 per tonne (±US$50/t allowing for variations caused by exchange rate movements). Accordingly, based on the average sales price and total costs, to reach breakeven the Company would need to sell approximately 50kt.

Management believes that the peak cash burn has now passed in terms of establishing its business operations in Brazil and as such, operations are reaching a steady state. Given this, the Company recently commenced a programme of revisiting all cost lines and identifying saving opportunities where they exist. Investors will be updated on the progress of this initiative in due course. Similarly, our historical cost of production has been above expectations, mostly related to lower production volumes. The Company continues to work on its direct operational costs in order to bring per tonne cost of production down and it is expected that these initiatives will generate savings going forward.

Harvest anticipates that due to an increase in sales volume in CY2020 coupled with the cost saving exercise currently being considered, the breakeven point will be reduced further next year, and as such we are aiming for the declaration of a maiden profit before tax next year.

Looking forward, Harvest is in the planning stages of a further expansion of its mining and storage areas in order to meet expected sales run rates for CY2020 and beyond. This expansion would be funded from existing resources.

Note: There is a timing difference between "accounting breakeven" and "cashflow breakeven", due to the accounts receivable collection cycle in the agricultural industry. It is common to sell inputs such as seed, fertiliser, chemicals etc on terms that are colloquially known as "harvest terms". That is, the buyer pays for the product when its crop has been harvested and sold. Many of the sales made by Harvest are on terms like this and for larger quantities it has agreed a monthly interest charge. The effect of this for Harvest is that it carries the working capital cost of the collection of these accounts receivable until it concludes the first round of a cash management cycle. Management anticipates that the first round of the cash management cycle will complete in Q2 2020. Harvest has more than sufficient cash resources to manage this cycle without interruption.

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

*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 fertilizer 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.