Brazil-focused Horizonte Minerals (LSE:HZM; TSX:HZM) has revealed that it is in a strong position to trade out of the current lockdown with £17 million cash on hand - £11 million ahead of the same period last year. 

The London-headquartered nickel developer said in a quarterly report for the three months to 31 March 2020 that it was “well-funded” to advance its key prospect in the state of Para in the north of Brazil. 

The 100%-owned Araguaia project is considered Brazil’s next major ferronickel mine. Feasibility studies put the mine’s lifespan at 28 years, with 52,000 tonnes of ferronickel produced annually for a total production run worth $1.6 billion. Civil engineer Pedro Rodrigues dos Reis joined the Horizonte team in October 2019 to advance Araguaia as project director. 

Work is underway to take Araguaia from the study stage to being “implementation ready”, said Horizonte. All major workstreams are continuing as planned, it said, while project financing is on schedule with “no negative effects” as yet seen from the pandemic. By the time Araguaia comes into production in 2022, the price of nickel is expected to reach $16,150/t, according to market analysts. 

The AIM and TSX-listed firm did report some short-term headwinds, including an increase in its pre-tax losses from £482,000 to £1.02 million for the period, due to a lack of revenue coming through in lockdown. But due to a weakened dollar, the company reported operational profits rising to £266,988 in the three months to 31 March 2020 compared to a £574,000 loss in the same period last year.

Market strong

The nickel market has remained buoyant since the Covid-19 pandemic breakout, driven by some long-term trends and some newer factors. Across 2019 the annual nickel price clipped to its highest since 2014. 

Why? Well, there has been significant supply reduction because of the Indonesian government making the surprise move to bring forward an export ban from January 2022 to January 2020. On the demand side, interest in rapidly growing electric vehicle markets continues. The metal is highly prized for its use in lithium-ion batteries that power electric vehicles and is being consumed in ever larger quantities. According to metals market analysts Roskill between now and 2029:

The push for automotive electrification is set to provide a dramatic upside to nickel. Its outlook is supported not only by the rapid volume of growth of the electric market, but also owing to the increased intensity of use of nickel, as part of efforts to improve the energy density of batteries and extend driving range. 

“[Over the next decade] Roskill forecasts that nickel use in batteries will grow from around 3%-4% of nickel demand, to account for as much as 15% to 20% of the market.” 

Horizonte’s share price has recovered strongly from recent lows in the wider market crash. In fact, it has added 70% since late March to hit 2.82p in early May trading.

Author: Mark Sheridan

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