Horizonte Minerals (LSE:HZM) said ‘multiple value drivers’ will provide an exciting year ahead for shareholders in an update on Thursday. The nickel-focused firm is currently developing two projects in Brazil, the Araguaia Ferronickel Project and a nickel-cobalt project called Vermelho.
Horizonte released a feasibility study for the Araguaia Project back in October last year. Based on an average nickel price of $14k per tonne, the company forecasts Araguaia could generate free cash flow of up to $1.6bn over an initial 28-year mine life. Last month, Horizonte received the construction license permitting it to construct a rotary kiln electric furnace processing plant and all associated infrastructure.
Meanwhile, a pre-feasibility study is underway at the Vermelho nickel-cobalt project which the company acquired in 2018. The previous owner, Vale previously completed a feasibility study on the project which was originally scheduled for construction in 2006. What made Vermelho so attractive to Horizonte is its proximity to Araguaia. The two projects are 100pc owned by the company and combined offer a potential nickel production of 40-50k tonnes annually. Operations are underway to demonstrate the economic viability of the project which will then feed into the pre-feasibility study.
Jeremy Martin, Chief Executive of Horizonte said: “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.”
In the wake of the recent tragedy in Brazil Martin added:
“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.”
The company is very bullish on the nickel market highlighting that inventories on the London Metal Exchange are at their lowest level for five years. Horizonte cites increasing demand from the stainless-steel market as well as the electric vehicle battery sector for the buoyant demand. At the time of writing the nickel spot price is around $12,800 per tonne. Many of the larger banks, including UBS and Morgan Stanley are predicting a price hike for nickel over the next few years, forecasting prices in the region of $16,500-$17,600 per tonne in 2021.
Martin commented: "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 Pará 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 online.
"2019 is set to be an exciting year for the Company with multiple value drivers for shareholders all set against a positive back drop of the broader nickel market and growing Brazilian economy."
Author: Stuart Langelaan
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