Mr. Jeremy Martin reports

HORIZONTE MINERALS Q1 2019 SHAREHOLDER UPDATE

Horizonte Minerals PLC has provided the following update to shareholders from chief executive officer Jeremy Martin.

Highlights

• Araguaia ferronickel project feasibility study (FS) completed in Q4 2018 delivering robust economics;
• Further upside potential with stage 2 expansion at Araguaia doubling annual nickel production;
• Construction licence recently granted by the Brazilian Para State Environmental Agency (SEMAS);
• Advancing project financing options for Araguaia;
• Vermelho nickel-cobalt project prefeasibility study (PFS) under way;
• Nickel showing positive fundamentals with midterm consensus pricing of $16,792 (U.S.)/tonne nickel for 2022;
• Brazil economy set for growth in 2019 and 2020 with gross domestic product set to increase 2.4 per cent and 2.3 per cent respectively.

Mr. Martin commented: "The company made further significant progress in the December quarter as we work towards developing the Araguaia ferronickel project and move towards becoming a nickel producer. A major milestone was the release of the FS demonstrating robust economics on the single line RKEF process plant which also includes the option to double annual nickel production through the stage 2 expansion. The stage 2 expansion case returned an estimated posttax net present value (1) (NPV) of $741-million (U.S.) (2) and internal rate of return (IRR) of 23.8 per cent using the FS base case nickel price forecast of $14,000 (U.S.)/t (3). In January, 2019, following completion of the FS, the company was awarded the construction licence for the project, which subject to funding, allows development to commence on the RKEF process plant and associated infrastructure. It is important to note that Araguaia does not produce tailings and does not have a tailings dam so is not affected by the recent ban on new upstream tailings dams in Brazil.

"Work recently commenced on the PFS for our Vermelho nickel-cobalt project. Snowden Mining Industry Consultants have been contracted to produce the mining schedules and act as overall study manager, in addition the Simulus Group based in Perth will provide detailed design information and costings for the Vermelho process flow sheet and together with our local Brazilian engineering partners, will deliver associated infrastructure to the project. In parallel we have our teams working on the environmental and social permitting, and new terms of reference have been submitted to SEMAS, the Brazilian Para State Environmental Agency, to advance Vermelho's environmental impact assessment.

"Horizonte holds two Tier 1 assets in terms of size and grade: the development-ready Araguaia ferronickel project and the Vermelho nickel-cobalt project. Our portfolio is therefore well placed at a time when demand in stainless steel and electric vehicle markets is increasing and outstripping new nickel supply coming on line.

"Two thousand nineteen is set to be an exciting year for the company with multiple value drivers for shareholders all set against a positive backdrop of the broader nickel market and growing Brazilian economy."

Detailed information

Nickel markets

Having fallen from 470,000 tonnes to approximately 200,000 tonnes at present, nickel inventories on the LME have continued to drop and are now at their lowest levels in five years. Significant new supply is required for the stainless steel market which is growing at around 5 per cent year on year, with further additional new demand driven from the electric vehicle (EV) battery sector. Whilst the physical number of EVs on the roads throughout the world remains relatively low at three million cars today, forecasts for the acceleration of adoptions of EVs vary from 20 million to 40 million cars on the roads by 2030, representing an estimated approximate tenfold increase.

At present it is difficult to see where significant new supply to meet this demand is going to materialize from.

A recent market assessment by Bloomberg New Energy Finance (NEF) points to nickel supply tightness creating growing anxiety as battery metal consumers look to draw greater volumes of nickel from inventory to satisfy demand. "Nickel is now the metal creating the most concern in the battery manufacturing community," added NEF analyst James Frith.

Cathode market leader Umicore SA also notes that supply constraints could push nickel prices up to as much as $20,000 (U.S.) to $25,000 (U.S.)/t.

Glencore has forecasted that growth in nickel demand would need to fall to minus 1 per cent for the nickel market to eliminate the current structural deficit which is leading to the drawdown in nickel stocks on a continuing basis.

As we write this, nickel prices remain around $12,500 (U.S.)/t. But the continued drawdown of global nickel inventory points to a stronger nickel price environment over the midterm.

Nickel is a favourite commodity pick amongst multiple banks/analysts for 2019 and 2020 with all of the large banks predicting notable price increases by 2021, including:

• UBS: $16,500 (U.S.)/t in 2021;
• Morgan Stanley: $16,500 (U.S.)/t in 2021;
• Scotiabank: $17,600 (U.S.)/t in 2021;
• Macquarie: $17,000 (U.S.)/t in 2021.

Araguaia ferronickel project (Araguaia)

In October of 2018, we released the FS for Araguaia. The base case of the FS uses a flat price of $14,000 (U.S.)/t nickel. The initial 28-year mine life generates free cash flow after taxation of $1.6-billion (U.S.) with sufficient mineral resources beyond the initial 28-year mine life. The financial model indicates an estimated posttax NPV of $401-million (U.S.) and IRR of 20.1 per cent. At operational levels, Araguaia is expected to produce an average of 14,500 t of nickel contained within approximately 52,000 t ferronickel per annum, utilizing proven RKEF technology currently used at over 40 mines around the world. Using a consensus price of nickel of $16,800 (U.S.)/t, the posttax NPV increases from $401-million (U.S.) up to $740-million (U.S.) and the IRR from 20.1 per cent up to 28.1 per cent. Another attractive key metric of the project is the C1 cash cost, which, at $8,193 (U.S.)/t Ni, places Araguaia in the lowest quartile for nickel-laterite projects globally, highlighting Araguaia's robust and competitive operating costs.

The FS for Araguaia was designed to allow for a second production line. In December last year we filed the National Instrument 43-101 report for Araguaia including the FS results and the potential upside which could be realized from doubling production by adding a second line. At 29,000/t per annum production of nickel, the expanded project would become globally significant production unit. Applying the FS base case nickel price of $14,000 (U.S.)/t, the stage 2 expansion demonstrates a step-change in the economics of Araguaia: increasing cash flows after taxation from $1.6-billion (U.S.) to $2.6-billion (U.S.); and NPV from $401-million (U.S.) up to $741-million (U.S.). The expansion would require no additional upfront capital as the second line would be financed through reinvestment of free cash flows generated from the existing operation.

Araguaia is well positioned as one of only a few construction-ready nickel projects in the world. With the average time from initial discovery to first production approximately eight to 10 years for most mining operations, Araguaia represents a unique opportunity to capitalize on the fundamentals of the nickel market as highlighted above.

The next step to move Araguaia into the construction phase is a project finance package. We appointed Endeavour Financial as our financial adviser, focusing on the debt and offtake development package for Araguaia. Endeavour Financial is a well-regarded firm with a strong record of success in the mining industry, specializing in arranging multisource financing for single asset development companies, an example being the recently closed $750-million (U.S.) financing package for Lundin Gold's Fruta del Norte project in Ecuador.

Vermelho nickel cobalt project (Vermelho)

The Vermelho project was acquired by Horizonte from Vale in early 2018, located in the southern part of the Carajas mining district approximately 140 kilometres from Araguaia North. Vale completed a full feasibility study on the project and it was scheduled for construction in 2006. Following the acquisition Horizonte released an NI 43-101 compliant mineral resource estimate; in the measured and indicated category, the project contains 167.8 million tonnes grading 1.01 per cent nickel and 0.06 per cent cobalt (at 0.9-per-cent nickel equivalent cut-off), estimated to contain 1.68 million tonnes (3,700 million pounds) of nickel and 94,000 tonnes (207 million lb) of cobalt. The mineral resource estimate places the Vermelho project as one of the largest, highest grade undeveloped laterite nickel-cobalt resources globally.

One of the key factors behind the acquisition of this quality resource was its location and close proximity to Araguaia. The combined resource base is high-grade, scalable and gives flexibility to have two potential operating centres, one at Araguaia as shown in the recent FS and one at Vermelho. Horizonte now has the potential to develop an annual nickel production of 40,000 to 50,000 tpa nickel from Araguaia and Vermelho within this 100-per-cent-owned, consolidated nickel district.

There are several phases of work currently under way at Vermelho, the first is to demonstrate upgrading the mixed hydroxide product (MHP) to nickel and cobalt sulphate suitable for use in the evolving EV battery market. The second phase will utilize the high-grade saprolite material to produce ferronickel via the same RKEF flow sheet as developed at Araguaia. This work will then feed into a PFS to demonstrate the economic viability of Vermelho on a lower throughput capacity and capital cost than the operation that Vale had planned to develop. Additionally, work on the ground has commenced with updated environmental and social baseline data collection as part of the permitting process.

Brazil

We have always championed Brazil as a stable, established jurisdiction for operations. In particular the Para state is pro-mining with the Carajas mining district hosting a number of world-class mines, combined with prospective geology and well-developed infrastructure, all key factors to allow the low-cost development of new projects. The company has received positive government and community support for Araguaia, culminating in the recent award of the construction licence. Another new positive development is the uplift in the Brazilian economy. Brazil has tightened control over inflation rates, which have decreased from 8.8 per cent in 2016 to 3.6 per cent in 2018. The country has also taken a series of measures aimed to improve fiscal responsibility, reduced government spending and increased direct foreign investment.

In 2018, Brazil held a presidential election in which the front-runner and now President, Jair Bolsonaro, had committed to "open the economy" to foreign investors, adopting a pro-business agenda and taking steps to improve investor confidence in Brazil. Within this scenario, consumer confidence is at its highest level since 2014 prompting Forbes to say that "Brazil is the best stock exchange to invest in right now" (Jan. 8, 2019) and the Bovespa Stock Exchange hit its highest point since inception in February, 2019.

Following the tragic accident on Friday, Jan. 25, at Vale's Feijao iron ore mine at Brumadinho, Minas Gerais, the Horizonte team in Brazil and the United Kingdom sends its sincere condolences to those affected by the event.

It is important to highlight that Araguaia, located approximately 1,800 kilometres north from Vale's Feijao iron ore mine, does not produce tailings and has no waste dams on the site. Araguaia, in line with many other global ferronickel operations, plans to produce slag in dry granulated pellets which will be stockpiled and potentially used in road fill as a binder or turned into other building products such as blocks or cladding sheet material.

About Horizonte Minerals PLC

Horizonte Minerals is an Alternative Investment Market and Toronto Stock Exchange-listed nickel development company focused in Brazil. The company is developing the Araguaia project, as the next major ferronickel mine in Brazil, and the Vermelho nickel-cobalt project, with the aim of being able to supply nickel and cobalt to the EV battery market. Both projects are 100 per cent owned.

(1) NPV calculated using 8-per-cent discount rate.

(2) One-U.S.-dollar/3.5-Brazilian-real exchange rate applied for life of mine.

(3) Wood Mackenzie short-term forecast -- refer to market section of Araguaia NI 43-101.

We seek Safe Harbor.