Junior nickel player Horizonte Minerals (LSE:HZM) reassured investors that coronavirus is yet to have a significant impact on its operations on Tuesday.
The firm said it remains well funded to achieve its goals and see out the spread of COVID-19 – which was declared a pandemic by the World Health Organization earlier this month. To date, nearly 200,000 cases of the virus have been reported globally, claiming 7,500 lives and causing markets around the world to crash at levels not seen since the financial crisis.
“As the world aggressively tackles the ongoing outbreak, we acknowledge there is growing uncertainty around economic growth and underlying business conditions,” said Horizonte. “While it would be inconsiderate to describe the situation as ‘business as usual’, we continue to work on the various workstreams required to achieve our stated goals.”
Among Horizonte’s goals is the development of its flagship Araguaia project to the construction-ready phase.
Araguaia is a tier-one ferronickel mining project located south of the Carajas mining district in north-east Brazil’s Para state. A stage two expansion case devised in a 2018 feasibility study gives the property a 26-year mine life, generating cash flows after tax of $2.6 billion with a $741 million net present value and a 23.8% internal rate of return.
These figures are based on a nickel price of $14,000 a tonne - well below the $18,000 a tonne the metal was trading at in October before its collapse in the face of falling stainless steel demand and coronavirus’ spread. Despite the short-term weakness, Horizonte believes that nickel market fundamentals remain “robust” for the medium-term and aligned with the planned start of Araguaia’s production.
The firm also hopes to progress discussions around financing Araguaia’s ultimate construction into a mine. It got the ball rolling here last August when it revealed a $25 million royalty funding agreement for the property with Orion Mine Finance – one of the world’s most prominent mining investors.
Alongside Araguaia, Horizonte is also developing the Vermelho nickel-cobalt project in Brazil, which it plans to use to supply nickel and cobalt to the EV battery market. A pre-feasibility study released in October last year confirmed the asset as a “large, high-grade resource with a long mine life and low-cost source of nickel sulphate for the battery industry”. Specifically, the work gave the project a 38-year mine life estimated to generate total cash flows after tax of $7.3 billion.
Elsewhere in Tuesday’s release, Horizonte its team on the ground in Brazil were well prepared to continue work safely.
“We have implemented strict health and safety policies specifically tailored to COVID-19,” said the firm. “To date, we have had no reported cases of the virus at any of our Brazil offices nor in London.”
Author: Daniel Flynn
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