Shares in Horizonte Minerals (LSE:HZM) broke out to a 2020 high of 4.2p on Wednesday after the nickel company announced a game-changing US$325 million financing package for its flagship project.
The firm, which was trading up 24% at writing, has executed a mandate to arrange a senior secured project finance facility with a syndicate of five international financial institutions.
BNP Paribas, Natixis, and Société Générale are all acting as mandated lead arrangers for the money, which will be put towards the construction and development of Horizonte's Araguaia ferronickel project in Brazil. The firm said these financial institutions all have extensive experience in providing project financing to greenfield mining projects and were chosen specifically due to their capabilities in Latin America.
Jeremy Martin, Horizonte's chief executive, said the new financing package would cover a significant portion of the pre-production capex required to complete stage 1 construction at Araguaia.
"We are targeting completion of the project financing package for the project by the end of 2020, provided that restrictions related to the Covid-19 pandemic do not cause further delays. We aim to start construction in early 2021," he added. "This major milestone moves us closer to our goal of becoming a nickel producer. We look forward to updating the market throughout the rest of this year on our progress."
Horizonte is developing Araguaia as Brazil's next major ferronickel mine. It is a Tier 1 project with a high-grade scalable resource based in the south of the renowned Carajas mining district in north-east Brazil's Para State.
A feasibility study for the project is made up of an open-pit nickel laterite mining operation that delivers ore from several pits to a central rotary kiln electric furnace metallurgical processing facility.
Araguaia's development is divided into two stages, the first of which will see it process 900,000ts of dry ore feed per year to produce 14,500 tonnes of nickel per year for an initial 28-year mine life. A second stage will then increase the project's production capacity to 29,000 tonnes of nickel per year by adding a second process line, increasing its mine life to 26 years.
Using a conservative US$14,000/t nickel price, this Stage 2 scenario would generate an estimated net present value of US$741 million and an internal rate of return of 23.8%. However, these figures increase to around US$1 billion and 30% when a US$16,000/t nickel price more in line with today's prices is used.
As it stands, Horizonte's market cap sits at just £60.8 million. With the financial firepower to develop Araguaia and fulfil its vast economic potential now behind it, this company's current valuation could soon end up looking very cheap as progress continues.
Author: Daniel Flynn
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