Horizonte Minerals plc / Index: AIM / Epic: HZM / Sector: Mining 7 March 2011 Horizonte Minerals plc (‘Horizonte’ or ‘the Company’) Final Results Horizonte, the AIM quoted exploration and development company focused in Brazil, announces its results for the year ended 31 December 2010. Overview * Focussed nickel and gold exploration and development company in Brazil with the support of two mining majors Teck Resources and AngloGold · Transformational deal completed in August 2010 to acquire 100 per cent of the advanced Araguaia nickel project in the Carajas mineral district of northern Brazil · Consolidated land position in the emerging Carajás nickel district - created the potential for a 100Mt resource with grades comparable to other leading nickel assets in Brazil · Continuing to fast-track the resource drilling with the aim of increasing the maiden resource and initiating a preliminary economic assessment in Q4 2011 · £5.3 million strategic alliance with AngloGold to explore for new gold targets in Brazil continuing to gain traction · Signed a further £4.5 million three year agreement with AngloGold in August 2010 to develop Falcão gold project in Brazil
Post-Period End
· Executed a formal Option Royalty Agreement with Anglo Pacific regarding future nickel production at Araguaia - US$500,000 paid for the option to acquire a 1.5% NSR for US$12.5 million which is exercisable on the delivery of a positive pre-feasibility study · Defined a maiden 43-101 inferred resource of 76.6Mt at 1.35% nickel and 0.06% cobalt in March 2011 · Strong cash position - £8.25 million fundraising completed in January 2011 for the development of Araguaia · Intention to dual list on the Toronto Stock Exchange H1 2011 to attract a wider institutional and retail following in Canada Chairman’s Statement This has been a year of substantial growth for Horizonte which has seen us emerge as a leading exploration and development company in the world-class Carajás mining province in northern Brazil, with a solid portfolio of nickel and gold assets, and supportive major mining partners which include Teck Resources (‘Teck’) and AngloGold Ashanti (‘AngloGold’). In the 2009 annual report, I stated that we were actively seeking opportunities to consolidate our position within the emerging Carajás nickel belt in northern Brazil that hosted our existing Lontra nickel project.

We were delighted to announce in July 2010 that we had completed a transformational deal with Teck, whereby we acquired the advanced Araguaia nickel asset adjacent to our Lontra project (together ‘Araguaia’) which has created the potential for a 100 million tonne (‘Mt’) resource with grades comparable to other leading nickel plays.

In completing this transaction, the value of your Company increased significantly both on an asset and corporate level. When we acquired Araguaia, Teck had completed a significant amount of drilling with over 489 drill holes totalling 11,400 metres of diamond drilling completed since its discovery in 2005.

In September 2010 we commenced a rapid development schedule including compiling and analysing Teck’s original drilling results from the project and initiating an 8,000 metre drill programme using three drill rigs with the aim of delineating a first stage resource with a target of between 60 - 70 Mt by the end of H1 2011.

We were delighted to announce an initial inferred resource estimate of 76.6 Mt at 1.35% nickel and 0.06% cobalt with a cut off grade of 1% nickel in March 2011 that exceeded this target.

We believe that the size and grade of the maiden resource clearly demonstrates that Araguaia has the potential to be developed into a major nickel deposit. Earlier in the 2011, we also further consolidated our position in this potentially world class nickel district by signing an option to acquire the adjacent Vila Oito and Floresta nickel laterite projects from Lara Exploration Ltd.

The Vila Oito project has a non compliant resource of 10.4 Mt grading 1.36% Ni. As we move forward it is our intention to add additional drill rigs to fast-track the resource delineation at Araguaia.

The combination of our maiden resource together with additional untested targets within the greater Araguaia project area should see us moving towards a resource target in excess of 100Mt.

With this in hand we are seeking a listing on the Toronto Stock Exchange with the aim of attracting a wider market. Also at the beginning of 2011, we undertook a fundraising, raising £8.25 million before expenses in order to further fast-track the development of Araguaia.

The placing, which was oversubscribed, received strong institutional demand from both new and existing shareholders in the UK.

After completion of the current 8,000m drilling programme, the funds will be used for a second phase expanded exploration programme to further test exploration targets within the project area and convert the high grade zones to the indicated resource category.

In addition to the resource drilling, metallurgical test work will be completed with the aim of initiating a preliminary economic assessment in Q4 2011. Furthermore, Horizonte executed a formal Option Royalty Agreement with Anglo Pacific Group Plc (‘Anglo Pacific’) regarding any future nickel production on Araguaia.

Under the terms of the agreement, Anglo Pacific has paid US$500,000 for an option to acquire a 1.5% NSR over Araguaia for US$12.5 million which is exercisable on the delivery of a positive pre-feasibility study.

We believe the level of payment demonstrates Anglo Pacific’s recognition of the quality of the project and the potential value that it may achieve as we fast-track its development. The nickel market has stabilised and the current price of over US$20,000 per tonne supports the ongoing nickel market deficit expected throughout 2011.

In the longer term citibank commented in its ‘Nickel Update’ of 8 December 2010 that the risk to supply disappointment is increasingly significant.

Approximately 70% of the world’s nickel resources are found in laterites, yet they account for just circa 40% of global nickel production.

The increasing application of leaching, usually by acid to laterites, has at times fallen short of expectations in both the duration of ramp-up and ultimate production achieved.

These leaching projects account for half of the expected increase in supply by 2015. Araguaia is well located and supported by established infrastructure both of which are essential as we progress through the development cycle through to potential production. However it must be noted that your Company is neither a single project company nor a one commodity business. Our strategic alliance with AngloGold to explore for new gold targets in Brazil has continued to gain traction; the first year of the US$5.3 million joint venture has been recently completed during which AngloGold funded US$900,000 of project expenditure.

This expansive relationship is rapidly creating a large number of new gold anomalies and we expect to advance these new targets towards drilling in the second year of this exciting programme. In August 2010 we signed a further three year agreement with AngloGold to explore our Falcão gold project also in Brazil.

Under the terms of the earn in agreement, AngloGold has the right to earn into a 51% participating interest in the Falcão project by funding the sum of US$4.5 million on project expenditure over the three year period.

The first year expenditure will again be US$900,000 and, in the second year, a further US$1.6 million, followed by a final amount in year three of US$2 million. We have recently completed the soil sampling programme on Falcão as well as an aerial geophysical survey.

The initial results are exciting and have returned a significant gold anomaly, approximately 3 km in length and between 300 and 600 metres in width, with consistent gold values above 50 ppb.

There are also a number of samples with over 1 g/t gold.

Additionally, in January 2011 an airborne magnetic and radiometric survey was flown over the project area which will assist in determining the main regional structural controls on the large alteration system and will further assist with defining drill targets.

All of the new data is still being compiled with the aim to initiate a 3,000 metre diamond drill programme in Q2 2011 with our partners to test the resource potential of Falcão. We believe Horizonte’s investment case is clearly evident; the newly enlarged Horizonte is now a leading nickel and gold focused exploration and development company in Brazil, with a world class nickel laterite project and an exciting portfolio of gold exploration assets with significant near term value.

This is in tandem with supportive mining majors and a strong treasury, both of which substantially de-risk Horizonte’s financial exposure in the future, places us in a fantastic position to generate value for our shareholders during another exciting year for the growth of your Company. Finally, as Chairman and fellow shareholder of Horizonte I would like to extend my gratitude for the support we have received from our shareholders during the past year, and would also like to thank our excellent management team led by Jeremy Martin for its continued dedication as we progress as a leading exploration company in Brazil. David J.

Hall Chairman 3 March 2011 For further information visit www.horizonteminerals.com or contact: Jeremy Martin Horizonte Minerals plc Tel: +44 (0) 20 7763 7157 David Hall Horizonte Minerals plc Tel: +44 (0) 20 7763 7157 Dominic Morley Panmure Gordon (UK) Limited (Nomad and Broker) Tel: +44 (0) 20 7459 3600 Katherine Roe Panmure Gordon (UK) Limited Tel: +44 (0) 20 7459 3600 Hannah Woodley Panmure Gordon (UK) Limited Tel: +44 (0) 20 7459 3600 Joanna Weaving finnCap Ltd (Joint Broker) Tel: +44 (0) 20 7600 1658 Matthew Robinson finnCap Ltd Tel: +44 (0) 20 7600 1658 Ben Thompson finnCap Ltd Tel: +44 (0) 20 7600 1658 Felicity Edwards St Brides Media & Finance Ltd (PR) Tel: +44 (0) 20 7236 1177 Hugo de Salis St Brides Media & Finance Ltd Tel: +44 (0) 20 7236 1177
Financial Results Consolidated Statement of Comprehensive Income for the year ended 31 December 2010
Year ended 31 December Year ended 31 December
2010 2009
Notes £ £ Continuing operations
Revenue
– – Cost of sales
– –
Gross profit
– – Administrative expenses
(1,257,954) (893,805) Acquisition costs expensed 5 (490,403) – Project impairment 11 (59,945) – (Loss)/gain on foreign exchange
(2,244) 3,269 Other operating income 7 694,540 –
Loss from operations 8 (1,116,006) (890,536) Gain on purchase of subsidiary undertaking 5 1,798,251 – Finance income 9 16,228 4,179 Finance costs 9 (68,035) –
Profit/(loss) before taxation
630,438 (886,357) Taxation 10 – –
Profit/(loss) for the year from continuing operations
630,438 (886,357)
Other comprehensive income
Exchange differences on translating foreign operations
1,092,632 –
Total comprehensive income/(loss) for the year
attributable to equity holders of the Company
1,723,070 (886,357)
Earnings per share from continuing operations
attributable to the equity holders of the Company
Basic (pence per share) 21 0.489 (1.94) Diluted (pence per share) 21 0.487 (1.94)
Consolidated Statement of Financial Position
31 December 2010 31 December 2009
Notes £ £ Assets
Non-current assets
Intangible assets 11 16,918,202 2,498,411 Property, plant & equipment 12 168,223 919 Deferred taxation 10 8,079,087 –
25,165,512 2,499,330 Current assets
Trade and other receivables 13 72,314 44,609 Cash and cash equivalents 14 3,847,031 1,281,410
3,919,345 1,326,019 Total assets
29,084,857 3,825,349 Equity and liabilities
Equity attributable to owners of the parent
Issued capital 15 2,465,605 590,191 Share premium 16 11,283,355 6,811,399 Other reserves 18 10,933,292 (1,048,100) Accumulated losses
(2,184,252) (2,867,224) Total equity
22,498,000 3,486,266 Liabilities
Non-current liabilities
Contingent consideration 19 2,676,502 – Deferred taxation 10 3,511,338 –
6,187,840 – Current liabilities
Trade and other payables 19 399,017 339,083
399,017 339,083 Total liabilities
6,586,857 339,083 Total equity and liabilities
29,084,857 3,825,349
Company Statement of Financial Position
31 December 2010 31 December 2009
Notes £ £ Assets
Non-current assets
Property, plant & equipment 12 2,810 899 Investment in subsidiaries 27 22,111,812 5,653,324
22,114,622 5,654,223 Current assets
Trade and other receivables 13 42,958 17,908 Cash and cash equivalents 14 3,638,534 1,100,002
3,681,492 1,117,910 Total assets
25,796,114 6,772,133 Equity and liabilities
Equity attributable to owners of the parent
Issued capital 15 2,465,605 590,191 Share premium 16 11,283,355 6,811,399 Merger reserve 18 10,888,760 – Accumulated losses
(2,104,258) (1,089,133) Total equity
22,533,462 6,312,457 Liabilities
Non-current liabilities
Contingent consideration 19 2,676,502 – Current liabilities
Trade and other payables 19 586,150 459,676 Total liabilities
3,262,652 459,676 Total equity and liabilities
25,796,114 6,772,133
Statements of Changes in Equity
Share capital £ Share premium £ Accumulated losses £ Other reserves £ Total £ Consolidated
As at 1 January 2009 404,477 5,771,728 (1,995,264) (1,048,100) 3,132,841 Issue of ordinary shares 185,714 1,114,286 – – 1,300,000 Issue costs – (74,615) – – (74,615) Share based payments – – 14,397 – 14,397 Total comprehensive income for the year – – (886,357) – (886,357) As at 31 December 2009 590,191 6,811,399 (2,867,224) (1,048,100) 3,486,266 Issue of ordinary shares 1,875,414 4,883,503 – 10,995,621 17,754,538 Issue costs – (411,547) – (106,861) (518,408) Share based payments – – 52,534 – 52,534 Total comprehensive income for the year – – 630,438 1,092,632 1,723,070 As at 31 December 2010 2,465,605 11,283,355 (2,184,252) 10,933,292 22,498,000 Company
As at 1 January 2009 404,477 5,771,728 (669,420) – 5,506,785 Issue of ordinary shares 185,714 1,114,286 – – 1,300,000 Issue costs – (74,615) – – (74,615) Share based payments – – 14,397 – 14,397 Total comprehensive income for the year – – (434,110) – (434,110) As at 31 December 2009 590,191 6,811,399 (1,089,133) – 6,312,457 Issue of ordinary shares 1,875,414 4,883,503 – 10,995,621 17,754,538 Issue costs – (411,547) – (106,861) (518,408) Share based payments – – 52,534 – 52,534 Total comprehensive income for the year – – (1,067,659) – (1,067,659) As at 31 December 2010 2,465,605 11,283,355 (2,104,258) 10,888,760 22,533,462
Consolidated Statement of Cash Flows For the year ended 31 December 2010
Notes 31 December 2010 £ 31 December 2009 £ Cash flows from operating activities
Profit/(loss) before taxation
630,438 (886,357) Interest income
(16,228) (4,179) Finance costs
68,035 – Employee share options charge
52,534 14,397 Gain on bargain purchase of subsidiary undertaking
(1,798,251) – Project impairment
59,945 – Transaction fees settled by share issue
150,000 – Gain on investment
(440,079) – Depreciation
31,161 719 Operating loss before changes in working capital
(1,262,445) (875,420) Increase in trade and other receivables
(27,705) (43,296) Increase in trade and other payables
56,975 41,656 Net cash outflow from operating activities
(1,233,175) (877,060) Cashflows from investing activities
Net purchase of intangible assets
(777,690) (117,883) Purchase of property, plant and equipment
(198,465) – Cash in acquired subsidiary 5 957 – Interest received
16,228 7,466 Net cash used in investing activities
(958,970) (110,417) Cash flows from financing activities
Net proceeds from issue of ordinary shares
4,757,707 1,225,385 Net cash inflow from financing activities
4,757,707 1,225,385 Net increase in cash and cash equivalents
2,565,562 237,908 Cash and cash equivalents at beginning of year
1,281,410 1,043,502 Exchange gains on cash and cash equivalents
59 – Cash and cash equivalents at end of the year 14 3,847,031 1,281,410
Major non-cash transactions On 17 August 2010, the Company issued 123,280,240 ordinary shares in consideration for the purchase of the entire share capital of Teck Cominco Brasil S.A.

and 10,000,000 ordinary shares in consideration for the purchase of the entire share capital of Lontra Empreendimentos e Participações Ltda (Note 5).

On the same date the Company issued a further 3,000,000 ordinary shares to certain professional advisors in settlement of services in relation to the acquisitions and placement of shares. During the year intangible exploration and evaluation costs of £484,921 were disposed of in exchange for shares in a joint venture company.
Company Statement of Cash flows For year ended 31 December 2010
Notes 31 December 2010 £ 31 December 2009 £ Cash flows from operating activities
Loss before taxation
(1,067,659) (434,110) Interest income
(16,142) (4,176) Transaction fees settled by share issue
150,000 – Employee share options charge
52,534 14,397 Depreciation
994 461 Operating loss before changes in working capital
(880,273) (423,428) Increase in trade and other receivables
(25,050) (16,596) Increase in trade and other payables
126,476 18,136 Net cash outflow from operating activities
(778,847) (421,888) Cashflows from investing activities
Loans to subsidiary undertakings
(1,453,565) (585,669) Purchase of property, plant and equipment
(2,905) – Interest received
16,142 7,463 Net cash used in investing activities
(1,440,328) (578,206) Cash flows from financing activities
Net proceeds from issue of ordinary shares
4,757,707 1,225,385 Net cash inflow from financing activities
4,757,707 1,225,385 Net increase in cash and cash equivalents
2,538,532 225,291 Cash and cash equivalents at beginning of year
1,100,002 874,711 Cash and cash equivalents at end of the year 14 3,638,534 1,100,002
Major non-cash transactions On 17 August 2010, the Company issued 123,280,240 ordinary shares in consideration for the purchase of the entire share capital of Teck Cominco Brasil S.A and 10,000,000 ordinary in consideration for the purchase of the entire share capital of Lontra Empreendimentos e Participações Ltda (Note 5).

On the same date the Company issued a further 3,000,000 ordinary shares to certain professional advisors in settlement of services in relation to the acquisitions and placement of shares.
Notes to the Financial Statements
1 General information The principal activity of Horizonte Minerals Plc (‘the Company’) and its subsidiaries (together ‘the Group’) is the exploration and development of precious and base metals.

The Company’s shares are listed on the Alternative Investment Market of the London Stock Exchange.

The Company is incorporated and domiciled in the UK. The address of its registered office is 26 Dover Street London W1S 4LY. 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these Financial Statements are set out below.

These policies have been consistently applied to all the years presented. 2.1 Basis of preparation These Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU), IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The Financial Statements have been prepared under the historical cost convention as modified by the revaluation of certain of the subsidiaries’ assets and liabilities to fair value for consolidation purposes.

A summary of the more important accounting policies is set out below. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.

It also requires management to exercise its judgement in the process of applying the Group’s Accounting Policies.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements, are disclosed in Note 4. 2.2 Changes in accounting policy and disclosures (a) New and amended standards adopted by the Group The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010. IFRS 3 (revised), ‘Business Combinations’, and consequential amendments to IAS 27, ‘Consolidated and separate financial statements’, IAS 28 ‘Investments in associates’, and IAS 31 ‘Interests in joint ventures’, are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared to IFRS 3.

For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income.

All acquisition costs are expensed. The revised standard has been applied to the acquisitions of the 100% controlling interests in Lontra Empreendimentos e Participações Ltda and Teck Cominco Brasil S.A on 17 August 2010.

The acquisition of Lontra Empreendimentos e Participações Ltda occurred in stages.

The revised standard requires goodwill to be determined only at the acquisition date rather than at the previous stages. The determination of goodwill includes the previously held equity interest adjusted to fair value, with the gain on re-measuring the previously held non-controlling interest included in the consolidated statement of comprehensive income.

Contingent consideration on the purchase of Teck Cominco Brasil S.A has been recognised at fair value on 17 August 2010.

Acquisition-related costs of £490,403 have been recognised in the consolidated statement of comprehensive income, which previously would have been included in the consideration for the business combination. (b) New and amended standards, and interpretations mandatory for the first time for the financial year beginning 1 January 2010 but not currently relevant to the Group. The following standards and amendments to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2010 or later periods, but not currently relevant to the Group. Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards” and IAS 27 “Consolidated and Separate Financial Statements” addressed concerns that retrospectively determining the cost of an investment in separate financial statements and applying the cost method in accordance with IAS 27 on first-time adoption of IFRSs cannot, in some circumstances, be achieved without undue cost or effort.

These amendments were effective for periods beginning on or after 1 July 2009. Further amendments to IFRS 1 addressed the retrospective application of IFRSs to particular situations (oil and gas assets and leasing contracts), and are aimed at ensuring that entities applying IFRSs will not face undue cost or effort in the transition process.

These amendments were effective for periods beginning on or after 1 January 2010. Amendments to IFRS 2 “Share-based Payment” clarified the accounting for group cash-settled share-based payment transactions.

These amendments were effective for periods beginning on or after 1 January 2010. Amendments to IAS 39 “Financial Instruments: Recognition and Measurement” provided additional guidance on what can be designated as a hedged item.

These amendments were effective for periods beginning on or after 1 July 2009. IFRIC 17 “Distributions of Non-cash Assets to Owners” standardised practice in the measurement of distributions of non cash assets to owners.

This interpretation was effective for periods beginning on or after 1 July 2009. IFRIC 18 “Transfers of Assets from Customers” clarified the requirements of IFRSs for agreements in which an entity receives from a customer an item of property, plant and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water).

This interpretation was effective for periods beginning on or after 1 July 2009. (c) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2010 and not early adopted The Group and Parent Company’s assessment of the impact of these new standards and interpretations is set out below. IFRS 9 “Financial Instruments” specifies how an entity should classify and measure financial instruments, including some hybrid contracts, with the aim of improving and simplifying the approach to classification and measurement compared with IAS 39.

This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

The Directors are assessing the possible impact of this standard on the Group’s Financial Statements. A revised version of IAS 24 “Related Party Disclosures” simplifies the disclosure requirements for government-related entities and clarifies the definition of a related party.

This revision is effective for periods beginning on or after 1 January 2011 and is not expected to have an impact on the Group’s or Parent Company’s Financial Statements. An amendment to IFRS 1 “First-time Adoption of International Financial Reporting Standards” relieves first-time adopters of IFRSs from providing the additional disclosures introduced in March 2009 by “Improving Disclosures about Financial Instruments” (Amendments to IFRS 7).

This amendment is effective for periods beginning on or after 1 July 2010 and is not expected to have an impact on the Group’s or Parent Company’s Financial Statements. Further Amendments to IFRS 1 replace references to a fixed date of 1 January 2004 with “the date of transition to IFRSs”, thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of transition to IFRSs, and provide guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation.

This amendment is effective for periods beginning on or after 1 July 2011, subject to EU endorsement, and is not expected to have an impact on the Group’s or Parent Company’s Financial Statements. Amendments to IFRS 7 “Financial Instruments: Disclosures” are designed to help users of financial statements evaluate the risk exposures relating to transfers of financial assets and the effect of those risks on an entity’s financial position.

These amendments are effective for periods beginning on or after 1 January 2011, subject to EU endorsement.

The Directors are assessing the possible impact of these amendments on the Group’s or Parent Company’s Financial Statements. Amendments to IAS 12 “Income Taxes” introduce a presumption that recovery of the carrying amount of an asset measured using the fair value model in IAS 40 “Investment Property” will normally be through sale.

These amendments are effective for periods beginning on or after 1 January 2012, subject to EU endorsement, and are not expected to have an impact on the Group’s or Parent Company’s Financial Statements. Amendments to IAS 32 “Financial Instruments: Presentation” address the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer.

These amendments are effective for periods beginning on or after 1 February 2010, and are not expected to have an impact on the Group’s or Parent Company’s Financial Statements. “Improvements to IFRSs” are collections of amendments to IFRSs resulting from the annual improvements project, a method of making necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project.

These improvements have various implementation dates; for May 2010 improvements, the earliest is effective for periods beginning on or after 1 July 2010 subject to EU endorsement.

The Directors are assessing the possible impact of these improvements on the Group’s or Parent Company’s Financial Statements. IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments” clarifies the treatment required when an entity renegotiates the terms of a financial liability with its creditor, and the creditor agrees to accept the entity’s shares or other equity instruments to settle the financial liability fully or partially. This interpretation is effective for periods beginning on or after 1 July 2010.

The Directors are assessing the possible impact of this interpretation on the Group’s or Parent Company’s Financial Statements. An amendment to IFRIC 14 “IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”, on prepayments of a minimum funding requirement, applies in the limited circumstances when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements.

The amendment permits such an entity to treat the benefit of such an early payment as an asset.

This amendment is effective for periods beginning on or after 1 January 2011, and is not expected to have an impact on the Group’s or Parent Company’s Financial Statements. 2.3 Basis of consolidation Horizonte Minerals Plc was incorporated on 16 January 2006.

On 23 March 2006 Horizonte Minerals Plc acquired the entire issued share capital of Horizonte Exploration Ltd (HEL) by way of a share for share exchange.

The transaction was treated as a group reconstruction and was accounted for using the merger accounting method as the entities were under common control before and after the acquisition. Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights.

The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

They are de-consolidated from the date that control ceases. Other than for the acquisition of HEL as noted above, the Group uses the acquisition method of accounting to account for business combinations.

The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group.

The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.

Acquisition-related costs are expensed as incurred unless they result from the issuance of shares, in which case they are offset against the premium on those shares within equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at their fair values at the acquisition date. Investments in subsidiaries are accounted for at cost less impairment.

Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. The excess of the consideration transferred and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill.

If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with policies adopted by the Group. References to various joint venture arrangements in the Chairman’s Statement and the Operations Review do not meet the definition of joint ventures under IAS 31 “Interests in Joint Ventures” and therefore these Financial Statements do not reflect the accounting treatments required under IAS 31. The following 100% owned subsidiaries have been included within the consolidated Financial Statements:
Country of incorporation
Subsidiary undertaking Parent company Nature of business Horizonte Exploration Ltd Horizonte Minerals Plc England Mineral Exploration Horizonte Minerals (IOM) Ltd Horizonte Exploration Ltd Isle of Man Holding company HM Brazil (IOM) Ltd Horizonte Minerals (IOM) Ltd Isle of Man Holding company HM Peru (IOM) Ltd Horizonte Minerals (IOM) Ltd Isle of Man Holding company Horizonte Nickel (IOM) Ltd Horizonte Minerals (IOM) Ltd Isle of Man Holding company HM do Brasil Ltda HM Brazil (IOM) Ltd Brazil Mineral Exploration Araguaia Niquel Mineração Ltda Horizonte Nickel (IOM) Ltd Brazil Mineral Exploration Lontra Empreendimentos e HM do Brasil Ltda/HM Brazil
Participações Ltda (IOM) Ltd Brazil Mineral Exploration Mineira El Aguila SAC HM Peru (IOM) Ltd Peru Mineral Exploration Mineira Cotahusi SAC Mineira El Aguila SAC Peru Mineral Exploration South America Resources Ltd Horizonte Minerals Plc Isle of Man Holding company Brazil Mineral Holdings Ltd South America Resources Ltd Isle of Man Holding company PMA Geoquimica Ltda Brazil Mineral Holdings Ltd Brazil Mineral Exploration
2.4 Going concern The Group’s business activities together with the factors likely to affect its future development, performance and position are set out in the Chairman’s Report on pages 2 to 4; in addition note 3 to the Financial Statements include the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposure to credit and liquidity risk. The Financial Statements have been prepared on a going concern basis.

Although the Group’s assets are not generating revenues and an operating loss has been reported, the Directors believe that the Group has sufficient funds to undertake its operating activities for a period of at least the next 12 months including any additional payments required in relation to its current exploration projects.

The Group has considerable financial resources, which, together with additional funding available from various joint venture partners, will be sufficient to fund the Group’s committed expenditure both operationally and on various exploration projects for the foreseeable future.

However, as additional projects are identified and existing projects move into production, additional funding may be required.

The amount of funding is estimated without any certainty at the point of approval of these Financial Statements and the Group may be required to raise additional funds either via an issue of equity or through the issuance of debt.

The Directors are confident that funds will be forthcoming if and when they are required. The Directors’ have a reasonable expectation that the Group and Company has adequate resources to continue in operational existence for the foreseeable future.

Thus they continue to adopt the going concern basis of accounting in preparing these Financial Statements. 2.5 Intangible Assets (a) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition.

Goodwill arising on the acquisition of subsidiaries is included in ‘intangible assets’.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.

Impairment losses on goodwill are not reversed.

Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash generating units for the purpose of impairment testing.

The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segment. (b) Exploration and evaluation assets The Group recognises expenditure as exploration and evaluation assets when it determines that those assets will be successful in finding specific mineral resources.

Expenditure included in the initial measurement of exploration and evaluation assets and which are classified as intangible assets relate to the acquisition of rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource.

Capitalisation of pre-production expenditure ceases when the mining property is capable of commercial production. Exploration and evaluation assets arising on business combinations are included at their acquisition-date fair value in accordance with IFRS 3 (revised) ‘Business combinations’.

Other exploration and evaluation assets and all subsequent expenditure on assets acquired as part of a business combination are recorded and held at cost. Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount.

The assessment is carried out by allocating exploration and evaluation assets to cash generating units, which are based on specific projects or geographical areas. Whenever the exploration for and evaluation of mineral resources in cash generating units does not lead to the discovery of commercially viable quantities of mineral resources and the Company has decided to discontinue such activities of that unit, the associated expenditures are written off to profit or loss. 2.6 Property, plant and equipment All property, plant and equipment is stated at historic cost less accumulated depreciation.

Historic cost includes expenditure that is directly attributable to the acquisition of the items. All repairs and maintenance costs are charged to profit or loss during the financial period in which they are incurred. Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, using the straight-line method, on the following bases: Office equipment 25% Vehicles and exploration equipment 25% - 33% An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other (losses)/gains’ in the statement of comprehensive income. 2.7 Impairment Assets that have an indefinite useful life; for example, goodwill or intangible assets not ready to use, are not subject to amortisation and are tested annually for impairment.

Intangible assets that are subject to amortisation and tangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.

The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
2.8 Foreign currency translation (a) Functional and presentation currency Items included in the Financial Statements of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’).

The functional currency of the UK and Isle of Man entities is sterling and the functional currency of the Brazilian and Peruvian entities is Brazilian Real and Peruvian Nuevo Sol respectively.

The Financial Statements are presented in Pounds Sterling, rounded to the nearest pound, which is the Company’s functional and Group’s presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where such items are re-measured.

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, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. (c) Group companies The results and financial position of all the Group’s 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: (1) 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; (2) each component of profit or loss is translated at average exchange rates during the accounting period (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and (3) all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of monetary items receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future are taken to other comprehensive income.

When a foreign operation is sold, such exchange differences are recognised in the statement of comprehensive income as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
2.9 Financial assets The Group has only one class of financial asset, loans and receivables, which are non-derivitive financial assets with fixed or determinable payments that are not quoted in an active market.

They are included in current assets, except for maturities greater than 12 months after the end of the reporting period.

These are classified as non-current assets.

The Group’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cash equivalents’ in the statement of financial position. Financial assets are initially recognised in the statement of financial position at fair value and subsequently carried at amortised cost using the effective interest method.

Provision is made for diminution in value where there is objective evidence of impairment. 2.10 Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and demand deposits with banks and other financial institutions, that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
2.11 Taxation The tax credit or expense for the period comprises current and deferred tax.

Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. The charge for current tax is calculated on the basis of the tax laws enacted or substantively enacted by the end of the reporting period in the countries where the company and its subsidiaries operate and generate taxable income.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.

It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred tax is accounted for using the liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.

However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax assets are recognised on tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax assets and liabilities are not discounted. 2.12 Share capital Shares are classified as equity when there is no obligation to transfer cash or other assets.

Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax.

Incremental costs directly attributable to the issue of equity instruments as consideration for the acquisition of a business are included in the cost of acquisition. 2.13 Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.

Accounts payable are classified as current liabilities if payment is due within one year or less.

If not, they are presented as non-current liabilities. Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. 2.14 Operating leases Leases of assets under which a significant amount of the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases.

Operating lease payments are charged to profit or loss on a straight-line basis over the period of the respective leases. 2.15 Share based payments and incentives The Group operates equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group.

The fair value of employee services received in exchange for the grant of share options are recognised as an expense.

The total expense to be apportioned over the vesting period is determined by reference to the fair value of the options granted: * Including any market performance conditions; * Excluding the impact of any service and non-market performance vesting conditions; and * Including the impact of any non-vesting conditions.
Non-market vesting conditions are included in assumptions about the number of options that are expected to vest.

The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.

At the end of each reporting period the Group revises its estimate of the number of options that are expected to vest.

It recognises the impact of the revision of original estimates, if any, in profit or loss, with a corresponding adjustment to equity. When options are exercised, the Company issues new shares.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. The fair value of goods or services received in exchange for shares is recognised as an expense. 2.16 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer, the Company’s chief operating decision-maker. 2.17 Finance income Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable. 3 Financial risk management The main financial risks that the Group’s activity exposes it to are liquidity and fluctuations on foreign currency. (a) Liquidity In keeping with similar sized mineral exploration groups, the Group’s continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital.

The Group monitors its cash and future funding requirements through the use of cash flow forecasts. All cash, with the exception of that required for immediate working capital requirements, is held on short-term deposit. (b) Foreign currency risks The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Brazilian Real, Peruvian Nuevo Sol, US Dollar and the UK pound.

Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group holds a proportion of its cash in US Dollars to hedge its exposure to foreign currency fluctuations and recognises the profits and losses resulting from currency fluctuations as and when they arise. (c) Interest rate risk As the Group has no borrowings, it is not exposed to interest rate risk on financial liabilities. The Group’s interest rate risk arises from its cash held on short-term deposit. (d) Price risk The Group is exposed to commodity price risk as a result of its operations.

However, given the size and stage of the Group’s operations, the costs of managing exposure to commodity price risk exceed any potential benefits.

The Directors will revisit the appropriateness of this policy should the Group’s operations change in size or nature.

The Group has no exposure to equity securities price risk as it has no listed or other equity investments. (e) Credit risk Credit risk arises from cash and cash equivalents as well as exposure to joint venture partners including outstanding receivables.

Management does not expect any losses from non-performance by these partners. No debt finance has been utilised and if required this is subject to pre-approval by the Board of Directors.

The amount of exposure to any individual counter party is subject to a limit, which is assessed by the Board. (f) Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, in order to provide returns for shareholders and to enable the Group to continue its exploration and evaluation activities.

The Group has no debt at the 31 December 2010 and defines capital based on the total equity of the Company.

The Group monitors its level of cash resources available against future planned exploration and evaluation activities and may issue new shares in order to raise further funds from time to time. The Group holds cash reserves on deposit at several banks and in different currencies until they are required and in order to match where possible with the corresponding liabilities in that currency. 4 Critical accounting estimates and judgements The preparation of the Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period.

Actual results may vary from the estimates used to produce these Financial Statements. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Significant items subject to such estimates and assumptions include, but are not limited to: Impairment of exploration and evaluation costs Exploration and evaluation costs have a carrying value at 31 December 2010 of £16,482,451 (2009: £2,498,411).

Management tests annually whether exploration projects have future economic value in accordance with the accounting policy stated in note 2.5.

Each exploration project is subject to an annual review by either a consultant or senior company geologist to determine if the exploration results returned to date warrant further exploration expenditure and have the potential to result in an economic discovery.

This review takes into consideration long term metal prices, anticipated resource volumes and grades, permitting and infrastructure.

In the event that a project does not represent an economic exploration target and results indicate there is no additional upside, a decision will be made to discontinue exploration.

The Directors have reviewed the estimated value of each project prepared by management and have made an impairment charge where appropriate. Estimated impairment of goodwill Goodwill has a carrying value at 31 December 2010 of £435,751 (2009: £Nil).

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.5. Management have concluded that there is no impairment charge necessary to the carrying value of goodwill. Fair value of exploration assets acquired in business combinations During the year ended 31 December 2010 the Group acquired exploration and evaluation assets with an estimated acquisition date fair value of £12,950,000 through business combinations.

Management has made various estimations regarding the fair value of exploration assets acquired in business combinations given the absence of any verifiable and accurate data or JORC compliant resource at that time.

The fair value of exploration assets acquired has been estimated based on a number of valuation techniques. Where acquisitions represent transactions between knowledgeable and willing parties on an arms length basis the exploration assets acquired have been valued on the basis of the consideration transferred.

Where acquisitions do not represent arms length transactions management have compared them to similar transactions that are on an arms length basis taking into account key factors such as certainty over the level of defined resource, processing technology and location infrastructure. Management has also undertaken an exercise to compare their estimated fair values based on the level of work completed and geological upside potential with similar exploration companies in the form of a benchmarking exercise. Further information is included in note 5.

Actual values could be different from management estimations. Contingent consideration Contingent consideration has a carrying value of £2,676,502 at 31 December 2010 (2009: £Nil).

The contingent consideration arrangement requires the Group to pay the former owners of Teck Cominco Brasil S.A 50% of the tax effect on utilisation of the tax losses existing in Teck Cominco Brasil S.A at the date of acquisition.

Under the terms of the acquisition agreement, tax losses that existed at the date of acquisition and which are subsequently utilised in a period greater than 10 years from that date are not subject to the contingent consideration arrangement. The fair value of this potential consideration has been determined using a hypothetical discounted cash flow analysis.

Management has made assumptions regarding the future operating parameters of the Araguaia Project, combined with local and global operating parameters taken from other comparable nickel projects, in order to calculate the ability to utilise the acquired tax losses, together with the timing of their utilisation.

The Group has used discounted cash flow analysis to determine when it is anticipated that the tax losses will be utilised and any potential contingent consideration paid.

Cash flow projections exceeding a period of five years have been estimated in order to incorporate the anticipated time period to establishing a JORC compliant resource, completing a feasibility study and then exploiting the estimated resource.

These cash flows could be affected by upward or downward movements in several factors to include commodity prices, operating costs, capital expenditure, production levels, grades, recoveries and interest rates. The carrying value of contingent consideration would be an estimated £184,246 lower or £65,316 higher if the taxable profits used in the discounted cash flows were to vary by 50% from management’s estimates.

Should no acquired tax losses be utilised within 10 years of the date of acquisition, no contingent consideration would be payable. Current and deferred taxation The Group is subject to income taxes in numerous jurisdictions.

Judgment is required in determining the worldwide provision for such taxes.

The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due.

Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the current and deferred income tax assets and liabilities in the period in which such determination is made. Deferred tax liabilities have been recognised on the fair value gains in exploration assets arising on the acquisitions of Teck Cominco Brasil S.A and Lontra Empreendimentos e Participações Ltda.

A deferred tax asset has been recognised on acquisition of Teck Cominco Brasil S.A for the utilisation of the available tax losses acquired.

Should the actual final outcome regarding the utilisation of these losses be different from management’s estimations, the Group may need to revise the carrying value of this asset. Share based payment transactions The Group has made awards of options and warrants over its unissued share capital to certain Directors and employees as part of their remuneration package. The valuation of these options and warrants involves making a number of critical estimates relating to price volatility, future dividend yields, expected life of the options and forfeiture rates.

These assumptions have been described in more detail in note 17. Other areas Other estimates include but are not limited to the allowance for doubtful accounts; employee benefit liabilities; future cash flows associated with assets; useful lives for depreciation, depletion and amortisation; workers’ compensation claims; income taxes; and fair value of financial instruments. 5 Business Combinations 5.1 Acquisition of Teck Cominco Brasil S.A On 17 August 2010 the Group acquired 100% of the share capital of Teck Cominco Brasil S.A., a wholly owned subsidiary of Teck Resources Limited.

Teck Cominco Brasil S.A.

is a Brazilian company owning the exploration rights to the Araguaia Nickel Project in Para State in northern Brazil.

The Araguaia project borders the Group’s Lontra assets and, as a result of the acquisition, the Group will be able to combine the Lontra and Araguaia assets with a view to conducting further exploration and eventually developing the project.