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Harvest Minerals Ltd (HMI)

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Friday 28 September, 2018

Harvest Minerals Ltd

Final Results

RNS Number : 2018C
Harvest Minerals Limited
28 September 2018
 

 

 

 

 

 

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

28 September 2018

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

Final Results

 

Harvest Minerals Limited, the AIM quoted natural fertiliser producer, is pleased to announce its final audited results for the year ended 30 June 2018.  The Company's annual report and accounts will be posted to shareholders today and uploaded to the Company's website.

 

Highlights

·      Commenced commercial production and revenue generation at the Arapua multi-nutrient, direct application, natural fertiliser project

·      Secured multiple sales orders for KPfértil, including two for large quantities

·      Fabricated and installed a modular processing plant at Arapua and, post-period end, enlarged the plant to facilitate the production and delivery of 320Kt of KPfértil in order to satisfy anticipated demand for product

·      Strengthened in-country sales and marketing team through key appointments and formal training exercises

·      Strong balance sheet showing cash and cash equivalents at the end of the financial year totalling $15,492,355 (2017: $1,386,284) following an oversubscribed placing in June 2018

·      Focus now on developing sales pipeline and achieving profitability

 

Chairman's Statement

 

It has been a very productive year for Harvest, during which we hit several key milestones as we advanced the Arapua multi-nutrient, direct application, natural fertiliser project ('Arapua' or 'the Project') towards commercial production.  The Project, located in the heart of the Brazilian agricultural belt close to a fast-growing local agricultural market, is focused on the production of a competitively priced, fully registered, natural remineraliser product, proven to improve crop and soil quality.   Arapua has a current resource of 13Mt, which is expected to support approximately 29 years of production, notwithstanding the significant upside potential; it is a low cost, high margin operation, and is well funded following an oversubscribed £9.7 million placing completed in June 2018.  Our focus in 2018 has been on sales and, to this end, we have strengthened our sales team and increased our marketing activities; as a result, we have secured initial orders including two contracts for large quantities of KPfértil.

 

Operations

Our latest operational focus has been on enlarging the plant at Arapua to facilitate the production and delivery of 320Kt of KPfértil per annum.  The enlarged plant became fully operational in Q3 2018. This expansion was integral in supporting our existing and anticipated sales pipeline as we step up our marketing activities.   Production has reached a run-rate equivalent to full production and we are busy producing KPfértil to supply into our existing sales orders.

 

In July 2018, our product, KPfértil, was formally registered as a remineraliser by the Brazilian Ministry of Agriculture, Livestock and Supply ('MAPA').  As a result, we anticipate increased interest and further market penetration in the months to come.  

 

We also received approval to trademark KPfértil by the Instituto Nacional da Propriedade Industrial in Brazil.  The trademark has been officially registered and is a key part of the Company's corporate identity in Brazil.   Additionally, we submitted an Environmental Report and Feasibility Study to the Brazilian Department of Mines ('DNPM') as part of the final application for a Full Mining Licence ('FML').  The FML is not a necessity for us at this stage as we can continue to operate under the Trial Mining Licence for another three years, but it will be gratifying to finalise this. 

 

During the year, we ran multiple crop agronomy trials focused on registering our product and our initial target market of coffee.  Conducted by four MAPA-approved organisations, the results exceeded our expectations and unequivocally confirmed the potential of KPfértil.   Post period end, we completed further agronomic tests on Brachiara or Signal grass.  These were also very successful, confirming the long-term effectiveness of KPfértil as a remineraliser for grass pasture, and opening a huge market for us given that Brazil has over 40 million hectares of Signal grass planted.

 

Sales

Farmers are increasingly recognising the tangible economic benefits in introducing KPfértil to their fertiliser rotation.  This is a good starting point for our strengthened sales and marketing team which is actively creating multiple sales channels including direct sales and developing a network of distribution partners.   As part of this drive, we have been arranging demonstrations and site visits, as well as intensive training sessions for distribution partners and ramping up the marketing and advertising activities.  These are ongoing, and initial feedback has been very positive. 

 

In early March 2018, we signed an agreement with Agrocerrado Produtos Agrícolas e Assistência Técnica LTDA, a fertiliser distributor in Brazil, for an initial order for 36Kt of KPfértil.  Later in June 2018, we signed a second major order for an initial 50Kt of KPfértil from a producer of organic fertiliser in Brazil.

 

Post period end, in July 2018, we formed a strategic alliance with Geociclo Biotecnologia S/A ("Geociclo"), one of the largest developers, producers and distributors of organic fertilisers in Brazil to market and sell KPfértil.  This gives us access to new agricultural regions in Brazil with added benefits including unrestricted access to its MAPA accredited research and trial production facility, which is expected to expediate the development of any future products.

 

Financials

Given the Company's stage of development, we are reporting a pre-tax loss of A$2,857,095 (2017: A$2,630,756).  We have a strong balance sheet showing cash and cash equivalents at the end of the financial year totalling A$15,492,355 (2017: A$1,386,284) following an oversubscribed placing in June 2018.  At this time, we welcomed several new institutional investors to our shareholder list, who recognised Harvest's straightforward and compelling proposition. 

 

Outlook

We firmly believe that KPfértil has the potential to replace significant amounts of conventional and more expensive fertilisers and become a staple product in the Minas Gerais agriculture belt in Brazil.   Given that the fertiliser market is buoyant and the agricultural sector in Brazil is one of the most rapidly expanding markets in the world, Harvest is clearly well positioned for future growth.  

 

Looking ahead, we have a distinct development strategy focused on building sales and generating profits at Arapua.  We may also look at other value-adding opportunities to utilise our strong team and contacts in the sector.

 

Finally, I would like to thank both the team and our shareholders for their ongoing support. 

 

Brian McMaster

Executive Chairman

28 September 2018

 

 

 

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2018


 

           

              Consolidated


Notes


 

2018

$

 

2017

$

Revenue from fertiliser sales



41,827

-

Less: Transfer to capitalised exploration and evaluation expenditure



(41,827)

-




-

-

Interest income



189

12,686

Other income - reimbursements



53,506

1,156

Total Revenue



53,695

13,842

 





Accounting and audit expenses



(72,819)

(159,327)

Advertising expense



(153,362)

(68,605)

Consulting and Directors' expenses

4


(1,233,525)

(1,422,429)

Legal expenses



(23,936)

(57,789)

Listing and share registry expenses



(83,150)

(36,411)

Rent and outgoings expense



(211,518)

(433,110)

Share based payment expense

23


(928,979)

(144,583)

Travel and accommodation expenses



(54,465)

(131,718)

Impairment of exploration expenditure

11


-

(2,494)

Foreign exchange (loss) / gain



116,843

(29,835)

Depreciation



(7,221)

(3,780)

Interest expense



(4,926)

-

Other expenses

5


(253,732)

(154,517)

Total expenses



(2,910,790)

(2,644,598)






Loss from continuing operations before income tax



(2,857,095)

(2,630,756)






Income tax benefit

6


-

-






Loss from continuing operations after income tax



(2,857,095)

(2,630,756)






Net loss for the year



(2,857,095)

(2,630,756)






Other comprehensive income / (loss)





Item that may be reclassified subsequently to profit or loss





Exchange differences on translation of foreign operations



(369,523)

(119,402)

Other comprehensive (loss) for the year



(3,226,618)

(2,750,158)






Total comprehensive (loss) for the year



(3,226,618)

(2,750,158)
















Loss per share attributable to owners of Harvest Minerals Limited   










Basic and diluted loss per share (cents per share)

20


(2.22)

(2.49)

 


    

Consolidated Statement of Financial Position 

as at 30 June 2018

 


 

           

              Consolidated


Notes


 

 2018

$

 

2017

$

CURRENT ASSETS





Cash and cash equivalents

7


15,492,355

1,386,284

Trade and other receivables

8


231,008

39,924

TOTAL CURRENT ASSETS



15,723,363

1,426,208






NON-CURRENT ASSETS





Plant and equipment

10


491,941

12,149

Deferred exploration and evaluation expenditure

11


6,854,518

5,865,430

TOTAL NON-CURRENT ASSETS



7,346,459

5,877,579






TOTAL ASSETS



23,069,822

7,303,787






CURRENT LIABILITIES





Trade and other payables

12


426,153

194,094

TOTAL CURRENT LIABILITIES



426,153

194,094






TOTAL LIABILITIES



426,153

194,094






NET ASSETS



22,643,669

7,109,693






EQUITY





Issued capital

13


42,576,068

23,892,802

Reserves

14


2,987,555

3,279,750

Accumulated losses

15


(22,919,954)

(20,062,859)





TOTAL EQUITY


22,643,669

7,109,693

 


      Consolidated Statement of Changes in Equity for the year ended 30 June 2018

 

 

Issued capital

$

Accumulated losses

$

Option reserve

$

Foreign currency translation reserve

$

     Total

$







Balance as at 1 July 2017

23,892,802

(20,062,859)

3,463,720

(183,970)

7,109,693

Total comprehensive loss for the year






Loss for the year

-

(2,857,095)

-

-

           (2,857,095)

Other comprehensive loss

-

-

-

(369,523)

               (369,523)

Total comprehensive loss for the year

-

(2,857,095)

-

(369,523)

           (3,226,618)

 

Transactions with owners in their capacity as owners






Shares issued as part of Placement

 19,284,091

 -  

-

-

           19,284,091

Shares issued to Directors and Employees

 928,979  

 -  

 -

-

                928,979

Warrants Issued

 -  

 -  

 77,328

-

                   77,328

Share issue costs

 (1,529,804)

 -  

-

-

           (1,529,804)

At 30 June 2018

           42,576,068

 

         (22,919,954)

3,541,048

(553,493)

           22,643,669







Balance at 1 July 2016

21,345,616

(17,432,103)

2,858,682

(64,568)

6,707,627

Total comprehensive loss for the year






Loss for the year

-

(2,630,756)

-

-

(2,630,756)

Other comprehensive loss

-

-

-

(119,402)

(119,402)

Total comprehensive loss

-

(2,630,756)

-

(119,402)

(2,750,158)

Transactions with owners in their capacity as owners






Shares issued as consideration for acquisition

600,000

-

-

-

600,000

Shares issued on exercise of options

2,418,774

-

-

-

2,418,774

Share issue costs

(471,588)

-

-

-

(471,588)

Share based payments

-

-

605,038

-

605,038

At 30 June 2017

23,892,802

(20,062,859)

3,463,720

(183,970)

7,109,693







 

 





Consolidated Statement of Cash Flows for the year ended 30 June 2018

 



            
                  Consolidated


Notes


2018

$

2017

$

Cash flows from operating Activities





Payments to suppliers and employees



(2,195,700)

(2,335,579)

Interest (paid) / received



(551)

11,357

Other income



53,506

1,156

Net CASH USED IN operating ACTIVITIES

7


(2,142,745)

(2,323,066)






Cash flows from investing activities





Purchase of plant and equipment



(512,686)

(52,370)

Proceeds from sale of plant and equipment



-

51,630

Proceeds from trial mining



43,440

-

Payments for exploration and evaluation expenditure



(1,230,396)

(1,398,880)

Net CASH USED IN investing ACTIVITIES



(1,699,642)

(1,399,620)






CASH FLOWS FROM FINANCING ACTIVITIES





Proceeds from share issue



19,284,091

-

Proceeds from exercise of options



-

2,418,774

Share issue costs



(1,452,476)

(17,159)

Net CASH PROVIDED BY financing ACTIVITIES



17,831,615

2,401,615






Net (decrease) / increase in cash held



13,989,228

(1,321,071)

Cash and cash equivalents at beginning of year



1,386,284

2,737,190

Effect of exchange rate fluctuations on cash held



116,843

(29,835)

Cash AND CASH EQUIVALENTS at end of the financial year

7


15,492,355

1,386,284

 

 

Notes to the financial statements at and for the year ended 30 June 2018

 

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 2018 was authorised for issue in accordance with a resolution of the Directors on 28 September 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 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.

 

(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 which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures compliance with International Financial Reporting Standards (IFRS).

 

(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 2018 and no change to the Group's accounting policy is required.

 

Reference

Title

Summary

Impact on Group's financial report

Application date for Group

AASB 9       

Financial Instruments

AASB 9 includes requirements for the classification and measurement of financial assets.  It was further amended by AASB 2010-7 to reflect amendments to the accounting for financial liabilities.

These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes are described below.

(a)     Financial assets that are debt instruments will be classified based on (1) the objective of the entity's business model for managing the financial assets; (2) the characteristics of the contractual cash flows. 

(b)     Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.

(c)     Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.

(d)     Where the fair value option is used for financial liabilities the change in fair value is to be accounted for as follows:

►   The change attributable to changes in credit risk is presented in other comprehensive income (OCI)

►   The remaining change is presented in profit or loss

If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss.

Consequential amendments were also made to other standards as a result of AASB 9, introduced by AASB 2009-11 and superseded by AASB 2010-7 and 2010-10.

The Group does not consider that the new standard will have a material impact on the Group's financial statements.

1 July 2018

AASB 15

Revenue from Contracts with Customers

An entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This means that revenue will be recognised when control of goods or services is transferred, rather than on transfer of risks and rewards as is currently the case under IAS 18 Revenue.

The Group does not consider that the new standard will have a material impact on the Group's financial statements.

1 July 2018

AASB 16

Leases

IFRS 16 eliminates the operating and finance lease classifications for lessees currently accounted for under AASB 117 Leases. It instead requires an entity to bring most leases onto its statement of financial position in a similar way to how existing finance leases are treated under AASB 117. An entity will be required to recognise a lease liability and a right of use asset in its statement of financial position for most leases.

 

There are some optional exemptions for leases with a period of 12 months or less and for low value leases.

The Group does not consider that the new standard will have a material impact on the Group's financial statements.

1 July 2019

 

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 2018, 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)    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.

Revenue from trial mining activities is offset against carried forward exploration and evaluation expenditure.

 

(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 and trial mining. 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.

 

 


                 Consolidated



2018

$

2017

$


4.          Consulting and Directors' Fees

Directors' fees


661,558

744,620

Company secretary fees


38,000

29,633

Public relations consulting fees


118,779

123,217

AIM nominated and financial adviser fees 


73,366

161,056

Other consultant fees


247,783

245,758

Corporate advisory fees


94,039

118,145

Total consulting and directors' fees


1,233,525

1,422,429

 

 

5.          Other Expenses

Insurance


6,265

9,116

Telephone and internet


1,080

13,329

Other


246,387

132,072

Total other expenses


253,732

154,517

 

 

 


                 Consolidated



2018

$

2017

$


6.          Income Tax

(a) Income tax benefit




Major component of tax benefit for the year:




Current tax                                           


-

-

Deferred tax


-

-

 


-

-

 

(b) Numerical reconciliation between aggregate tax benefit recognised in the statement of comprehensive income and tax benefit calculated per the statutory income tax rate.




A reconciliation between tax benefit and the product of accounting loss before income tax multiplied by the Group's applicable tax rate is as follows:








Loss from continuing operations before income tax benefit


(2,854,316)

(2,630,756)





Income tax benefit calculated at 27.5% (2017: 27.5%)


(784,937)

(723,458)

Non-deductible expenses


278,694

686

Income tax benefit not brought to account


506,243

722,772

Income tax benefit


-

-



 

The tax rate used in the above reconciliation is the corporate tax rate of 27.5% payable by Australian corporate entities on taxable profits under Australia tax law. This reduction in corporate tax rate from 30% in 2016 was substantively enacted as part of the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 (on 19 May 2017).

 

(c) Unused tax losses





Unused tax losses


11,941,645

9,171,972

Potential tax benefit not recognised at 27.5% (2017: 27.5%)


3,283,952

2,522,292

 

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.

 

 

 



                                       Consolidated



2018

$

2017

$

7.          Cash and Cash Equivalents

  Reconciliation of Cash and Cash Equivalents

Cash comprises:





Cash at bank


15,492,355

1,386,284




15,492,355

1,386,284


Reconciliation of operating loss after tax to the cash flows from operations





Loss from ordinary activities after tax


(2,857,095)

(2,630,756)


Non-cash items





Share based payments (refer note 23)


928,979

144,583


Depreciation charges


7,221

3,780


Exploration expenditure written off


-

2,494


Advances written off


8,671

-


Foreign exchange (loss) / gain


(116,843)

29,835


Change in assets and liabilities





(Increase) / Decrease in trade and other receivables


(1,045)

3,324


Increase / (Decrease) in trade and other payables


(112,633)

123,674


Net cash outflow from operating activities


(2,142,745)

(2,323,066)


 

8.          Trade and Other Receivables - Current

Cash advances


192,343

-


GST receivable


4,367

7,581


Refundable security deposit


14,991

14,213


Other


19,307

18,130




231,008

39,924


 

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).

 

Name of Entity

Country of Incorporation

Equity Holding 2018

Equity Holding 2017

 




Triumph Tin Mining Limited

Australia

100%

100%

Lotus Mining Pty Limited

Australia

100%

100%

Triunfo Mineracao do Brasil Ltda

Brazil

100%

100%

HAG Fertilizantes Ltda 1

Brazil

99.99%

N/A

 

1 HAG Fertilizantes Ltda was registered during the year, with the Company's 99.99% shareholding being subscribed to for a payment of $34,846 (BRL 99,999).



 



                                 Consolidated



2018

$

2017

$


10.        Plant and Equipment

Plant and Equipment





Cost


534,931

53,713


Accumulated depreciation and impairment


(49,832)

(44,154)


Net carrying amount


485,099

9,559







Computer Equipment and Software





Cost


913

1,031


Accumulated depreciation and impairment


(913)

(977)


Net carrying amount


-

54







Furniture, Fixtures and Fittings





Cost


9,454

4,971


Accumulated depreciation and impairment


(2,612)

(2,435)


Net carrying amount


6,842

2,536







Total Plant and Equipment


491,941

12,149


 

Movements in Plant and Equipment




 




Plant and Equipment




At beginning of the year


9,559

11,412

Effect of foreign exchange rate


(26,154)

(709)

Additions


507,372

-

Depreciation charge for the year


(5,678)

(1,144)



485,099

9,559

Computer Equipment and Software




At beginning of the year


54

275

Effect of foreign exchange rate


(119)

(60)

Depreciation charge for the year


65

(161)



-

54

Furniture, Fixtures and Fittings




At beginning of the year


2,536

3,207

Effect of foreign exchange rate


(831)

(285)

Additions


5,314

-

Depreciation charge for the year


(177)

(386)



6,842

2,536

Motor Vehicles




At beginning of the year


-

-

Additions


-

52,370

Disposals


-

(51,630)

Effect of foreign exchange rate


-

951

Depreciation charge for the year


-

(1,691)



-

-

Total Plant and Equipment


491,941

12,149

 


                                                         Consolidated



2018

$

2017

$

11.        Deferred Exploration and Evaluation Expenditure

At beginning of the year


5,865,430

3,967,167


Acquisition of Sergi Potash Project1


100,000

700,000


Exploration expenditure during the year


1,216,280

1,310,472


Proceeds from trial mining


(41,827)

-


Impairment loss


-

(2,494)


Net exchange differences on translation


(285,365)

(109,715)


Total exploration and evaluation


6,854,518

5,865,430


 

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 previous 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.  During the current period, a payment of $100,000 cash was made. Refer to Note 16 for further details of the committed expenditure.

 

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 payables


401,022

180,094


Accruals


20,932

14,000


Tax payable


4,199

-




426,153

194,094


 

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

(a) Issued capital





Ordinary shares fully paid


42,576,068

23,892,802


 

 

         2018

  2017

(b) Movements in shares on issue

No. of shares

$

No. of shares

$

At beginning of the year

116,838,589

23,892,802

93,991,202

21,345,616

Shares issued to Directors and employees

3,000,000

928,979

-

-

Shares issued as part of placement

64,497,295

19,284,091

-

-


184,335,884

44,105,872

93,991,202

21,345,616

Shares issued as consideration for acquisition 1

-

-

6,000,000

600,000

Shares issued on exercise of options

-

-

16,847,387

2,418,774

Share issue costs

-

(1,529,804)

-

(471,588)

At end of the year

184,335,884

42,576,068

116,838,589

23,892,802

 

1 Refer Note 11



 

(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 $22,643,669 at 30 June 2018 (2017: $7,109,693). 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 / warrants

As at balance date, there were 2,755,125 unissued ordinary shares under options and 600,000 unissued ordinary shares under warrants. 

 

The details of the options at balance date and movements in issued options since 1 July 2017 are as follows:

 


Options

Warrants


Exercise at 14p

Exercise at 10p


by 31/12/19

By 25/10/19

Balance at 1 July 2017

2,755,125

-

Granted during the year

-

600,000

Balance at 30 June 2018

2,755,125

600,000

Balance at the date of this report

2,755,125

600,000

 

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.

 

 

 


                                     Consolidated



2018

$

2017

$


14.        Reserves

Option reserve


3,541,048

3,463,720


Foreign currency translation reserve


(553,493)

(183,970)




2,987,555

3,279,750


     Movements in Reserves

Option reserve




At beginning of the year


3,463,720

2,858,682

Options/warrants issued during the year


77,328

605,038

At 30 June


3,541,048

3,463,720

 

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 warrants issued during the financial year.

 



                                     Consolidated



2018

$

2017

$


Foreign currency translation reserve




At beginning of the year


(183,970)

(64,568)

Foreign currency translation


(369,523)

(119,402)

At 30 June


(553,493)

(183,970)

 

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

Movements in accumulated losses were as follows:




At beginning of the year


(20,062,859)

(17,432,103)

Loss for the year


(2,857,095)

(2,630,756)

At 30 June


(22,919,954)

(20,062,859)

 

16.       Expenditure Commitments

 

(a)   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:

 

Within one year



100,000

100,000

After one year but not longer than five years



4,150,804

3,801,152

After five years



6,663,948

6,862,909




10,914,752

10,764,061

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)., which have not been fulfilled as at 30 June 2018 have therefore been recorded as commitments in note 16 (a) above.

   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 payments of $100,000 each year 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)., which have not been fulfilled as at 30 June 2018, have therefore been recorded as commitments in note 16 (a) above.

 

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 element of the consideration noted at a). has not been fulfilled as at 30 June 2018 and has therefore been recorded as a commitment in note 16(a) above., The 2% Net Smelter Return Royalty has not been recorded as a commitment as it 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.

 

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


                                                                    Consolidated



2018

$

2017

$


The auditor of Harvest Minerals Limited is HLB Mann Judd.


Amounts received or due and receivable for:




-  Audit or review of the financial report of the entity and any other entity in the Group


21,000

23,000


 

 





18.       Events Subsequent to Balance Date

On 16 July 2018, the Company increased its investment in HAG Fertilizantes Ltda from 99.99% to 100% for a further payment of $0.35 (BRL 1.00).

 

On 18 July 2018, the Company announced it had received approval from the Ministry of Agriculture to register KPfértil as a remineraliser. The Company also received trademark approval for KPfértil by the Instituto Nacional da Propriedade Industrial in Brazil.  The trademark has been officially registered for an initial ten years and is an integral part of the Company's corporate identity in Brazil.

 

On 23 July 2018, the Company issued 1,500,000 ordinary fully paid shares to Executive Directors and certain Senior Management for nil consideration after the Company met certain performance considerations set out under an incentivisation scheme. 

 

On 26 July 2018, the Company announced it had signed a strategic alliance agreement with Geociclo Biotecnologia S/A ("Geociclo").  This alliance will enable KPfértil to be marketed and sold by Geociclo's established sales force, provide access to new agricultural regions in Brazil dominated by Geociclo, provide unrestricted access to Geociclo's MAPA accredited research and trial production facility and provide storage for significant quantities of KPfértil.  Under the agreement and upon completion of certain conditions precedent, Harvest Minerals Limited's wholly owned subsidiary HAG Fertilizantes Ltda, will provide a capital injection to Geociclo of USD $1,000,000.  Subject to further due diligence, Harvest may provide a working capital loan to Geociclo and shall have an option to acquire 100% of the issued and outstanding shares in the capital of Geociclo.  Approximately USD $330,000 was paid pursuant to the agreement to Geociclo in July 2018 as a payment in advance in relation to the initial capital injection set forth in the agreement.

 

On 10 September 2018, the Company announced the appointment of Mr David Edghill as Chief Financial Officer.

 

On 17 September 2018, the Company announced Agronomic tests which demonstrate that as a slow release source of potassium ('K') and phosphate ('P'), KPfértil outperforms traditional Super Triple Phosphate ('TSP') fertilisers, increasing both plant growth (dry matter production) and yield (agronomic efficiency). 

 

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 were owed $29,745 at year end (2017: $28,000).

 

Garrison Capital (UK) Limited, a company in which Mr McMaster is a director, provided management and administrative services totalling $211,561 (2017: $1,796). $82,112 (2017: $nil) was 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 $197,963 (2017: $156,633). No balance (2017: $nil) was outstanding at year end.

 

Palisade Business Consulting Pty Limited, a company in which Mr James is a director, provided the Group with accounting and company secretarial fees along with providing a serviced office.  Fees received by Palisade Business Consulting were $144,620 (2017: $nil). $16,913 (2017: $15,375) 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


                                                                 Consolidated



2018

$

2017

$


Loss used in calculating basic and dilutive EPS



(2,857,095)

(2,630,756)

 







Number of Shares

Weighted average number of ordinary shares used in calculating basic earnings / (loss) per share:



128,591,902

105,765,673






Effect of dilution:





Share options



-

-

Adjusted weighted average number of ordinary shares used in calculating diluted loss per share:



128,591,902

105,765,673

 

There is no impact from 600,000 warrants and 2,755,125 options outstanding at 30 June 2018 (2017: 2,755,125 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 2018 and 30 June 2017 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 at 30 June 2018 are GBP (A$15,282,606) and USD (A$5,154).

 

Foreign currency sensitivity analysis

A 10% increase and decrease in the GBP and USD against the Australian dollar would lead to a $152,878 increase / decrease in results (2017: $128,340 increase / decrease in results).

 

(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.

 

 


                                   Consolidated



2018

$

2017

$


Cash and cash equivalents


15,492,355

1,386,284


 

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

Judgements of reasonably possible movements

Effect on Post Tax Earnings

Increase/(Decrease)

Effect on  Equity

including accumulated losses

Increase/(Decrease)



2018

$

2017

$

2018

$

2017

$

Increase 100 basis points


154,924

13,863

154,924

13,863

Decrease 100 basis points


(154,924)

(13,863)

(154,924)

(13,863)

 

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 2017.

 

(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 2018, 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 2018 (2017: 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 2018 and 30 June 2017.

 

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:

 


Consolidated


2018

2017


$

$




Exploration expenditure



Share based payment to vendor

-

600,000




Capital raising expenses



Share based payments to supplier

77,328

460,455




Profit and loss



Share based payments to Directors and employees

928,979

144,583

 

Exploration expenditure

During the financial year ended 30 June 2017, 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 of the agreement.

 

Capital raising expenses

The table below summaries warrants granted to brokers during the year:

 

Grant Date

Expiry  date

Exercise price

Balance at start of the year

Granted during the year

Exercised during the year

Expired during the year

Balance at end of the year

Exercisable at end of the year

25-Oct-17

25-Oct-19

$0.1712

-

600,000

-               

-                 

600,000

600,000

-

       2.00

               -  

              -  

         1.32

         1.32

 -   

$0.1712

               -  

              -  

$0.1712

$0.1712  

 

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: $0.212

·      Risk-free interest rate: 1.5%

·      Volatility: 110%

 

The fair value of the warrants granted was $0.129 per warrant.

 

Profit and loss

The following shares were issued during the year to employees and Directors as payment for services performed:

 

Date

Number of shares

Share price at grant date

Value

$

8 Feb 18

1,500,000

$0.2523

378,499

24 May 18

1,500,000

$0.3670

550,480


3,000,000


928,979

 

24.       Dividends

No dividend was paid or declared by the Company 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 2018.

 

The balance of the franking account is Nil as at 30 June 2018 (2017: 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:

 


                           Consolidated

 


2018

$

2017

$

 

Short term employee benefits


661,558

744,620

Share based payments


619,320

-

Total remuneration


1,280,878

744,620

 

26.       Parent Entity Information

The following details information related to the parent entity, Harvest Minerals Limited, at 30 June 2018. The information presented here has been prepared using consistent accounting policies as presented in note 2.


                                                    Parent



2018

$

2017

$


 





Current assets


15,338,389

1,348,213


Non current assets


7,569,252

5,949,572


Total Assets


22,907,641

7,297,785


 





Current liabilities


263,972

188,092


Total Liabilities


263,972

188,092


Net Assets


22,643,669

7,109,693







Issued capital


42,576,068

23,892,802


Option reserve


3,541,048

3,463,720


Accumulated losses


(23,473,447)

(20,246,829)


Total Equity


22,643,669

7,109,693







Loss for the year


(3,226,618)

(2,750,159)


Total comprehensive loss for the year


(3,226,618)

(2,750,159)

 


 

 

Guarantees

Harvest Minerals Limited has not entered into any guarantees in relation to the debts of its subsidiary.

 

Other Commitments and Contingencies

Harvest Minerals Limited has commitments which are disclosed in note 16. There are no commitments to acquire property, plant and equipment. The Company has no contingent liabilities.

 

 

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:

 

Harvest Minerals Limited

Brian McMaster (Chairman)

Tel: +44 (0) 20 7317 6629

 

 

 

Strand Hanson Limited

(Nominated & Financial Adviser)

James Spinney

Ritchie Balmer

Jack Botros

Tel: +44 (0)20 7409 3494

 

 

 

Arden Partners plc

(Joint Broker)

Tim Dainton

Paul Brotherhood

Paul Shackleton

Tel: +44 (0) 20 7614 5900

 

Shard Capital Partners

(Joint Broker)

 

Damon Heath

 

Tel: +44 (0) 20 7186 9900

 

 

 

St Brides Partners Ltd

(Financial PR)

Isabel de Salis

Gaby Jenner

Tel: +44 (0)20 7236 1177

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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