Horizonte Minerals

  • Horizonte in strong cash position with lockdown end in sight (HZM)

    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

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and MiningMaven Ltd are not responsible for the article's content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

     

  • Horizonte Minerals files Araguaia feasibility study with Brazilian government (HZM)

    Horizonte Minerals (LSE:HZM) dipped 3.3pc to 2.1pc today after filing the feasibility study for its flagship Araguaia project with Brazil's government. The nickel development firm said it has handed over the study to Brazil's Para state in line with government standards.

  • Horizonte Minerals jumps as strong samples verify Vermelho processing plans (HZM)

    Horizonte Minerals (LSE:HZM) bounced 5.3pc to 1.8p on Tuesday after revealing that strong sampling results will allow it to push ahead with the development of its Vermelho nickel-cobalt project in Brazil.

    The business said test work on samples of limonite ore from the project, which is based in the Carajas mining district, revealed a high-purity product containing 21.8pc cobalt. This exceeds the reference grade used for sulphate pricing. Meanwhile, the outfit said that nickel sulphate is produced as a solution ready for purification to a final battery-grade product.

    When put together, Horizonte said these results confirm the suitability of the Pressure Acid Leach process and subsequent purification stages. This method was selected by the firm in its previous work at Vermelho and will be used to produce cobalt and nickel sulphate that can supply the electric vehicle (EV) battery markets.

    As such, the positive test work results will be integrated into Horizonte’s ongoing pre-feasibility study at Vermelho. A study produced by the asset’s previous owner, Vale S.A., found that the project could produce 46k tonnes of nickel and 2.5k tonnes of cobalt per year.

    Tuesday’s update follows test work earlier in the year that showed that Vermelho saprolite ore is also suitable for conventional processing. This can take place at the Rotary Kiln Electric Furnace that Horizonte is constructing at its nearby Araguaia ferronickel project.

    Horizonte’s chief executive Jeremy Martin called Tuesday’s results a ‘major milestone’ for the organisation, adding:

    ‘The Vermelho project is a value driver for the Company, it is a high-grade scalable resource, with good infrastructure and has the potential to be fast-tracked to development. The successful completion of this sulphate test work confirms that the selected process flow sheet is suitable to treat the Vermelho ore and when combined with the earlier successful RKEF test work demonstrates that alternate process routes exist for the project.  The data from the test programmes will be incorporated into the Vermelho Pre-feasibility Study, for release in early H2, with the objective of demonstrating a robust set of economics for the project.’

    Martin also highlighted robust conditions in the EV market, which are leading miners and battery manufacturers to accelerate efforts to seek out high-quality battery metal projects.

    ‘We see Vermelho as an attractive strategic asset with the ability to produce nickel sulphate and a non-conflict, ethical source of cobalt,’  he said.

    Elsewhere, Martin said that Horizonte is continuing to advance project financing at Araguaia, with seven international banks showing interest in a project financing syndicate. He added that discussions are also underway with numerous groups around product marketing and offtake agreements.

    A feasibility study last year gave Araguaia an initial 28-year mine life, a post-tax net present value (NPV) of $401m and an internal rate of return (IRR) of 20.1pc using a base case nickel price forecast of $14,000/t. Horizonte expects the project to produce an average of 14,500 tonnes of nickel a year, housed within 52,000 tonnes of ferronickel.  Against this, the asset has a capital cost estimate of $443m. This includes $65.3m of contingencies.

    In Tuesday’s update, Martin once highlighted favourable macro conditions as a potential driver of third-party interest in the project: ‘The medium term consensus nickel price is around US$16,200/tonne which, based on the Feasibility Economics on Araguaia, deliver over US$2 billion of net cash flow over the life of mine at a C1 cash cost of around U$6,800/t nickel placing the project in the lower quartile of global laterite nickel operations and one of a very limited number of scalable, high grade, fully permitted, construction ready projects globally.

    ‘This robust demand picture for nickel positions Horizonte well, owning 100% of two Tier 1 nickel projects, within trucking distance of each other with the potential to produce 40,000 to 50,000 tonnes per year of nickel to service both the traditional stainless and EV battery market as well a cobalt revenue stream from outside of the Democratic Republic of Congo (DRC ) and service both the traditional stainless and EV battery market.’

    Author: Daniel Flynn

    The Author holds a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    Catalyst Information Services Ltd, the owner of MiningMaven.com, does not own a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

  • Horizonte Minerals leaps to 2020 highs as it delivers maiden sustainability report (HZM)

    Horizonte Minerals(LSE:HZM) was trading another 13% higher on Monday morning at 4.75p after delivering its first-ever sustainability report – an important milestone in its ongoing transition into a nickel producer.

    The report provides an overview of the company’s environmental stewardship, social responsibility, and corporate governance progress over the 2019 financial year.

    Primarily, the work focuses on work at Araguaia, the tier one project based in Brazil’s renowned Carajas mining district that Horizonteis developing as the country’s next major ferronickel mine.

    However, it also includes data from the company’s Vermelho nickel-cobalt project, which was also confirmed as a low-cost tier one project with a large high-grade resource and long mine life last year.

    Among the highlights of the sustainability report were US$1.5 million of direct economic contribution in Brazil, zero lost time injuries & fatalities, and over 200 community engagements.

    Meanwhile, the work noted that 55% of Horizonte’stotal purchases came from local suppliers, 42% of its employees are females, and nearly half of its workforce has been sourced locally within Brazil’s Para state.

    Chief executive Jeremy Martin noted that producing such a report for the first time marks an “important step” in Horizonte’sevolution and development into a nickel producer”.

    "As we continue to build momentum in our journey towards production, we remain committed to helping our communities grow alongside us, protecting the environment in which we operate and delivering value to our shareholders."

    Here, he refers to the strong progress made by the firm at Araguaia over the past year.

    This culminated in the news last week that Horizontehas secured a game-changing US$325 million financing package for the project lead arranged by the likes of BNP Paribas, Natixis, and Société Générale.

    The institutions were won over by Araguaia’s strong economics, which were laid out in a recent feasibility study.

    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.

    The money secured last week covers a significant portion of the pre-production capex required to complete stage one construction at Araguaia, and prompted a 24% increase in Horizonte’sshare price on the day.

    Following the release of Monday’s sustainability report, the company has now risen by more than a third over the past month and close to 90% over the last year.

    However, with a market cap of just over £60 million, there could scope for much more upside moving forward as Horizontepushes forward across its portfolio at pace with renewed financial support and ESG credentials.

    Author: Daniel Flynn

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, owns a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and MiningMaven Ltd are not responsible for the article's content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

  • Horizonte Minerals primed to build Araguaia after getting final government green light (HZM)

    Horizonte Minerals (LSE:HZM) was awarded a critical construction licence for its flagship ferronickel project in Brazil yesterday. The news helped shares in the nickel development company advance by as much as 8.9pc to 2.3p.

    The construction licence, known locally as the Licença de Instalação (LI), applies to Horizonte’s 100pc-owned Araguaia ferronickel project. It was granted by SEMAS, the Brazilian Para State Environmental Agency. It gives Horizonte the permits required to construct a rotary kiln electric furnace processing plant at Araguaia. This means it is now fully permitted for construction to begin.

    Horizonte called the news a ‘major de-risking step’ for Araguaia, with chief executive Jeremy Martin adding that it represents a ‘major milestone’ for the business.

    ‘Subject to funding, the company is now in a position to commence construction with the necessary environmental permits approved, including water abstraction permits issued in 2018 together with the newly issued LI,’ said Martin.

    ‘The LI allows development to commence on the RKEF process plant and associated infrastructure. The award of the LI has been delivered on time and on budget with the Horizonte team working closely with SEMAS, other State agencies and the local communities. Consistent with our objective to provide long-term sustainable value for our shareholders, employees and communities, we developed integrated solutions focused on environmental protection, water efficiency and socio-economic development.

    Today’s approval follows the release of a feasibility study results for the asset in October. These were filed with the Para state government two months later.

    The study confirmed Araguaia as a low-cost source of ferronickel for the stainless-steel industry. It gave the project an initial 28-year mine life, during which it will generate cash flows after taxation of $1.6bn.

    Meanwhile, it has an estimated post-tax net present value (NPV) of $401m and an internal rate of return (IRR) of 20.1pc using a base case nickel price forecast of $14,000/t.  This NPV increases to $740m when using the consensus mid-term nickel price of $16,800/t.

    Horizonte expects Araguaia to produce an average of 14,500 tonnes of nickel a year, housed within 52,000 tonnes of ferronickel. Against this, the development has a capital cost estimate of $443m. This includes $65.3m of contingencies.

    Crucially, Horizonte has also designed the study to accommodate a second process line. This 'stage two expansion' could double Araguaia’s production capacity to 29,000 tonnes a year. Its introduction assumes a stage one production rate of 900kts a year for three years. After this period, Horizonte would reinvest free cash flows to extend the plant's capacity to 1.8Mts per year.

    If this expansion takes place, then Araguaia will have a 26-year mine life and generate cash flows after tax of $2.6bn. Meanwhile, the asset’s NPV and IRR would hit $741m and 23.8pc respectively, using base case nickel prices.

    Horizonte is also the owner of the Vermelho project in Brazil, which it describes as one of the largest, highest-grade undeveloped laterite nickel-cobalt resources globally. The site contains a measured and indicated resource of 167.8MMts, estimated to house 1.68MMts of nickel and 94,000ts of cobalt.

    In yesterday’s update, Martin said the progress at Araguaia combined, the potential on offer at Vermelho, and the attractive nickel market backdrop combine to set Horizonte up well for the rest of the year:

    ‘The LI and FS results combined with the positive fundamentals around the nickel market positions Horizonte well for 2019, with the construction-ready Araguaia project to supply the ferronickel market and our second project, the Vermelho nickel-cobalt project, being advanced to supply the Electric Vehicle battery market. We look forward to updating the market over the coming months, at what is an exciting time for the Company.’

    Author: Daniel Flynn

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
    The Author has not been paid to produce this piece by the company or companies mentioned above.
    Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
    MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

  • Horizonte Minerals sees exciting year ahead with its two Brazilian nickel projects (HZM)

    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

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    The Author has not been paid to produce this piece by the company or companies mentioned above.

    Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

     

     

  • Horizonte Minerals soars after revealing US$325m financing package for Araguaia nickel project (HZM)

    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

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, owns a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and MiningMaven Ltd are not responsible for the article's content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

  • Horizonte Minerals to push forward at Araguaia after completing $25m Orion royalty deal (HZM)

    Horizonte Minerals (LSE:HZM) sat at 4p on Monday morning after confirming the drawdown of $25m worth of funding towards its Araguaia ferronickel project in the Para state of Brazil.

    As announced in August, Orion Mine Finance has provided an upfront $25m cash payment to Horizonte in exchange for a 2.25pc royalty on Araguaia. This royalty applies only to the first 426,429ts of contained nickel within the ferronickel produced and sold at the asset. This volume is equivalent to the nickel production estimated over Araguaia’s life of mine as per its stage one feasibility study (FS).

    Orion is a significant player in the mining financing space, deploying around $1.5bn in royalties, streams, debt, and equity over the past three years alone. The non-dilutive funding it has provided to Horizonte will support the business in advancing pre-construction work streams at Araguaia.

    Araguaia is a Tier 1 mining project with a high-grade scalable resource, located south of the Carajás Mining District in the Pará State of north-east Brazil.  The area boasts plenty of well -developed infrastructure such as roads, rail and hydroelectric power.

    Horizonte’s stage one FS for the asset centres around an open-pit nickel laterite mining operation that delivers ore from several pits to a central processing facility. Here, a single line rotary kiln electric furnace (RKEF) extracts ferronickel, used in the stainless-steel industry, from Araguaia’s ore. After an initial ramp-up period, the project will reach full capacity of c.900,000ts of dry ore feed per year to produce 52,000ts of ferronickel containing 14,500ts of nickel annually. Over an initial 28-year mine life, the FS design generates free cash flows after taxation of $1.6bn returning an IRR of more 20pc against on an initial capital cost of $443m.

    On top of this, Araguaia has been designed to allow for a second RKEF process plant, funding through operational cash flow. This stage two expansion would double Araguaia’s ferronickel output, providing for a 26-year mine life generating cash flows after taxation of $2.6bn with an estimated NPV of $741m and an IRR of 23.8pc. All of these figures were reached using a conservative base case nickel price forecast of $14,000/t, well below the $16,462/t at which the metal presently sits.

    Monday’s news comes just days after Horizonte announced that a pre-feasibility study (PFS) confirmed its Vermelho project as a ‘large, high-grade resource, with a long mine life and low-cost source of nickel sulphate for the battery industry’.

    The work estimated that the property, also based in Para, would have a 38-year mine life generating total cash flows after tax of $7.3bn. Elsewhere, the PFS gave Vermelho – which produces nickel suitable for use in electric vehicle batteries- an IRR of 26pc and an estimated base case post-tax NPV of $1.7bn against an initial capital cost estimate of $642m. Finally, the work put Vermelho’s estimated annual production at 25,000ts of nickel and 1,250ts of cobalt when operating at full capacity. This translates into a cash cost of $8,020/t of nickel, defining the project as a low-cost producer.

    Author: Daniel Flynn

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, does not own a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, has been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven Ltd is not responsible for its content or accuracy and does not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

  • Jeremy Martin maps out Horizonte Minerals’ key project milestones in investor call (HZM)

    Following an exciting 2019 that saw it deliver stellar progress across both of its Brazilian nickel projects, Horizonte Minerals (LSE:HZM) has sat relatively flat so far this year, failing to break out above 3.9p. However, in an investor call on Thursday, the firm’s CEO Jeremy Martin set out a clear plan for value creation over H1 2020 – highlighting a raft of portfolio-wide financing and construction milestones on the horizon.

    Pushing forward at Araguaia

    In Thursday’s call, Martin told listening investors that Horizonte’s primary source of news flow over the first half of 2020 is likely to be its Araguaia project.

    Araguaia is based south of the Carajás Mining District in the Pará State of northeast Brazil and is being developed by Horizonte as the country’s next tier-one ferronickel mine. In the stage two expansion case, a feasibility study using a conservative base case nickel price forecast of $14,000 a tonne gave the project a 26-year mine life. Over this period, the study estimated that the project would generate cash flows after tax of $2.6 billion, a net present value of $741 million, and an internal rate of return of $23.8%.

    Trial mining at the Araguaia project (Source: Horizonte Minerals)

    Following much progress throughout 2019, Martin said he expects developments at Araguaia in 2020 to stem from two key areas – financing and early works in lead up to construction. Digging deeper, the chief executive said that the project’s financing efforts are generally being divided between equity, offtake agreement, and commercial lenders.

    On the equity front, Horizonte stormed ahead last year when it received of $25 million of funding for Araguaia from Orion Mine Finance in exchange for a 2.25% royalty on an initial 426,429 tonnes nickel from the project. Orion is a leading force in mining financing, having deployed around $1.5 billion in royalties, stream, debt, and equity over the past three years alone. In Thursday’s call, Martin said he was not only confident that Orion would be a key player “in the next stage of project finance”but that Horizonte was also engaged with several additional groups interested in equity.

    Meanwhile, on the offtake front, Martin said Horizonte was in the process of talking to several interested groups, adding: “We are currently focused on export credit agency financing around offtake and then that will roll out into a broader market-led offtake, closing out the balance as we move into the final finance package.”

    Finally, Martin said that Horizonte has been receiving keen interest from a syndicate of commercial lenders. This group is currently comprised of around five international banks and four local Brazilian financial institutions – two of whom are scheduled to conduct back-to-back site visits imminently. Martin said these institutions are becoming increasingly attracted by Brazil’s position as a broadly stable jurisdiction and the general lack of construction-ready nickel projects in the global mid-cap space.

    “The appetite for looking at assets like Araguaia has definitely increased, which is obviously positive,” he added. “We are getting good indication in terms of the debt level that these banks are prepared to invest at, and also alignment on nickel price assumption used across the various groups. Broadly speaking, we are looking at between 60-65% debt financing for Araguaia, and the indication so far is that that is potentially achievable. The balance will then be made up of equity and offtake.”

    All-in-all, Martin said Horizonte expects to push forward on the delivery of some of the discrete elements of the financial package before having a full-financing package in place “by mid-year into the third quarter”.

    Meanwhile, on the technical side, Martin said callers should expect Horizonte to deliver engineering progress throughout the first half of the year including hiring of the key engineering group and build-up of the owners team. Horizonte is currently in the process of taking the project to the stage where it is primed for construction once financing is in place.

    “Across all of the areas of the plant we are increasing the engineering designs and foundation designs, completing steelwork, going into the market and getting detailed pricing for areas that were factored in the feasibility study, completing detailed engineering on the power, and looking at detailed logistics,” said Martin. “It is really about having all the major equipment packages specified with final contracts ready to execute on the closing of the project financing, and we expect to deliver plenty of newsflow on this front over the coming months.”

    When questioned on Araguaia’s permit status, Martin reiterated that the project is fully permitted for construction and outlined that the team has a robust social and environmental work program planned for 2020 ahead of construction.

    The location of Horizonte’s project in Brazil (Source: Horizonte Minerals)

    Finally, Martin told investors that they could expect to be updated on progress at Horizonte’s second Carajás-based project – Vermelho – over the first half of this year. A pre-feasibility study completed late last year confirmed Vermelho as a tier 1 project with a vast, high-grade resource, a long mine life, and a low-cost source of nickel sulphate for the battery industry. Martin said that Horizonte plans to advance permitting quickly at the asset and is also progressing discussions with potential financial and technical partners for the project.

    “When we acquired the project, all of the permits had been archived by Vale, so we had good baseline data and we should be able to advance Vermelho fairly rapidly up to being fully permitted. The next phase on the technical side is taking that project through to full feasibility. We will be exploring options around funding partners for that project and that is ongoing as well.”

    Where next for shares?

    Martin’s comment regarding Araguaia’s potential financing is undoubtedly encouraging. With so much potential interest in place, it is now down to the firm to create an overall finance package that serves the best interests of investors ahead of launching into construction and ultimately production. Considering the significantly positive reaction in the share price on the release of the Royalty deal in 2019, we expect to see further positive developments as milestones are announced along the finance pathway throughout the coming months. If Horizonte can deliver on plans to have Araguaia construction ready by mid-2020 while also posting regular development updates for Vermelho, it could usher in some much-needed positive trading momentum.

    To download and read our recent, detailed report on the Araguaia project, please click here

  • REPORT: Horizonte Minerals- Accelerating plans to bring the Araguaia ferronickel project into production (HZM)

    Against a backdrop of surging nickel prices (up over 50% year-to-date), Horizonte Minerals (LSE:HZM) has made great progress at its wholly-owned Araguaia nickel project in Brazil over the course of 2019.

    Araguaia is a tier one mining asset with a high-grade, scalable resource that Horizonte plans to develop as Brazil’s next major source of production for ferronickel – an alloy that contains c.30pc nickel and c.70pc iron.

    With first production scheduled for 2022, MiningMaven has taken a deep dive into Araguaia, its background, and Horizonte’s two stage expansion plans as well as looking at why the project’s economics are so appealing.

    Please click here to read our report in full.

     

     

     

  • Stimulus measures and a strong balance sheet favour Horizonte Minerals in trying times (HZM)

    The future of many junior miners has become rather less clear over the last few weeks in the face of falling commodity prices and uncertainty around when investor demand, cash, and liquidity will return to the market. However, Brazil-focused nickel player Horizonte Minerals (LSE:HZM) could present an exception to this trend.

    Horizonte’s flagship asset is Araguaia, 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 gave 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. The company is also developing the Vermelho nickel-cobalt project in Brazil, which it plans to use to supply nickel and cobalt to the electric vehicle battery market.

    The first critical ace in the hole for Horizonte is its funding situation. Although construction on Araguaia is ready to begin – it had not commenced before the Covid-19 outbreak was deemed a pandemic. This means the company will not have to spend cash on continuing or halting production during the outbreak either for financial or health and safety reasons. Handily, this leaves the company fully-funded for the rest of the year. This is an enviable position that few junior miners can currently boast.

    It is also worth noting that Horizonte recently announced that it remains committed to progressing discussions around financing Araguaia’s ultimate construction into a mine in spite of the Covid-19 outbreak. 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.

    Macro forces

    Elsewhere, Horizonte is positioned strongly from a macro perspective. Putting aside recent market events for one moment, the firm plans to supply nickel to both the electric vehicle (“EVs”) and stainless-steel industries from its two projects. These are two huge sector opportunities. JP Morgan sees EVs accounting for 30% of global vehicle sales in 2025 compared to 1% in 2016. Meanwhile, the global stainless steel market is forecast to grow at a 6.3% CAGR through to 2027 and looks set to benefit from stimulus packages directed at construction materials.

    Returning to the present day, it is no secret that the world has faced an unprecedented selloff in recent weeks. However, central banks are now stepping in to add massive liquidity and shore up shaky markets. The US Federal Reserve has announced what it called an “unlimited” buy up of mortgage-backed securities and corporate debt, the Bank of England has slashed interest rates to 0.1%, and the European Central Bank has announced plans to buy up to 750 million euros in government and private sector debt, as well as commercial paper, by the end of 2020. 

    With this anchor in place, things look much more encouraging for the nickel market over the long-term – the timeframe of most interest to Horizonte. For example, Wood MacKenzie recently noted that while Covid-19 is having a severe near-term impact on nickel prices, there will be little to no impact in the longer term. As such, the analyst firm has maintained its long-term view on nickel. 

    This is highly encouraging for Horizonte, which based its economics for Araguaia around a nickel price of $14,000 per tonne. This looked conservative in October, when the metal was trading at $18,000 a tonne. Using this figure in the stage 2 expansion case would have increased the project’s NPV(8) to $1.48 billion from $741 million, and its internal rate of return to 34.8% from 23.8%. Once commodities and nickel start to rebound, then this upside will once again become a serious possibility.

    A strong position

    The market situation now heavily favours juniors with little to no debt, which is where Horizonte stands out among its peers. Alongside this, a lack of ongoing cash burn at the construction-ready phase puts the firm in prime position to make the best gains when lockdown procedures come to a close and markets skyrocket as manufacturing and production spins back up again.

    Author: Mark Sheridan

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, does not own a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

     

  • Who will be the big winners from a nickel price boom? (HZM, POW, RGM)

    2019 was an exciting period for the nickel market, with increasing demand and supply disruption helping to drive the metal’s price higher at a time when other commodities trod water. Having started the year at $10,600/t (“per tonne”) on the London Metals Exchange (“LME”), the metal hit a high of $18,000/t in September and became one of the year’s strongest performing metals.

    The price of nickel subsequently dropped, hitting a low of $13,000/t in December. However, this pullback could have created an opportunity, and investors are now eagerly anticipating what might come in 2020 for the base metal.

    With many of the forces that propelled last year’s nickel rally still in place, we have taken a look at several of the London-listed firms that will benefit if the metal soars.

    Strong supply/demand dynamics

    On the demand side, stainless steel – which accounts for most of nickel’s global usage – experienced a surge during 2019.

    Meanwhile, the level of nickel required for electric vehicles (“EVs”) continued to grow, with more units being sold at the same time as critical developments in battery technology increased dependency on the base metal. According to the Nickel Institute, two of the most commonly used types of EV batteries, Nickel Cobalt Aluminium and Nickel Manganese Cobalt (“NMC”), are now made up of 80% and 33% nickel respectively. Meanwhile, newer formulations of NMC batteries are also approaching 80% nickel content, the body says.

    Elsewhere, nickel prices were bolstered by fears on the supply side. Indonesia, the world’s largest nickel producer, confirmed plans to bring forward a ban on the export of raw nickel ores from 2022 to January 2020. With Chinese producers stocking up on nickel inventories in anticipation of the ban, LME nickel warehouse stock levels have reportedly dropped by almost 50%. In October, Reuters reported that stocks had even fallen to 79,800 tonnes, their lowest value since January 2009.

    A secure setting for 2020

    Nickel currently sits at around $13,800/t, approximately 30% higher than it was a year ago in spite of the recent decline. This suggests that the bull market is still intact, with fundamental growth expected across core markets as supply concerns continue.

    From a demand perspective, the use of nickel in the stainless-steel sector is expected to continue to rise at a steady rate.

    But the real game-changer for the metal this year could be in EV space. According to Kitco, batteries (including those used to power laptops, phones, etc.) currently account for 5% of the global nickel market. However, with a record four million EV units slated for global sale over the next 12 months, this share could rise to 8% in 2020.

    With EV use set to grow by 30-40% annually for some years, the nickel market is likely to witness enduring change. Global demand is expected to rise from two million tonnes per annum, where it currently sits, to six million tonnes per annum by 2035. Batteries are expected to account for almost half of this demand growth.

    Meanwhile, nickel’s bleak supply outlook is also set to linger. Wood Mackenzie has estimated that Indonesia’s export ban will directly result in the loss of 190,000 metric tons of nickel globally by next year. Meanwhile, very few large-scale nickel projects have been developed in recent years. With the process of moving greenfield nickel assets from exploration through to production taking many years, many analysts believe that LME stocks will continue to fall as demand grows. This is expected to result in an annual average deficit of 60 kilotonnes of the metal through to 2027.

    Add the Federal Reserve’s dovish rate stance into the mix, and the combination of dwindling supply and rising demand could create an ideal setting for nickel explorers and producers globally.

    For example, Fastmarkets analysts forecast an average LME nickel cash price of $16,375/t in 2020- a considerable leap on the metal’s current position. Meanwhile, Wood Mackenzie expects nickel prices to continue breaking out beyond the current 12-month period, reaching $25,000/t by 2025 and $28,000/t by 2027.

    Who will be the big nickel winners?

    Several firms listed on London’s junior market are well primed to benefit from an increase in nickel prices throughout 2020.

    Horizonte Minerals (LSE:HZM) is one of the most likely candidates. The company wholly-owns the advanced Araguaia ferronickel project and the earlier-stage Vermelho nickel-cobalt asset to the south of the major Carajás mining district in Brazil.

    Horizonte has grown the resources of its assets by more than 800% in just seven years. It now plans to turn Araguaia into Brazil’s next major tier-one producing ferronickel mine by 2022.

    The firm recently entered a $25 million royalty agreement with Orion Mine Finance, providing the initial capital required to begin an early works programme at Araguaia and advance the project towards construction. At a nickel price of $14,000/t, the project has an estimated net present value (“NPV) of $741 million and an internal rate of return (“IRR”) of 23.8% (provided stage two expansion is completed).

    Applying recent nickel price highs of $16,000/t only serves to improve Araguaia’s economics. Under these conditions, the asset’s NPV rises to $1 billion while its IRR hits 30%. This would see the project generate free cash flow of $3.5bn. For perspective, Horizonte’s market cap currently sits at £51.8 million.

    Another London-based stock that could benefit from surging nickel prices is Power Metal Resources (LSE:POW). This company recently confirmed that it would earn-in to a 40% interest in the Molopo Farms Complex (“MFC”) nickel-copper-PGM (“platinum group metals”) project in Botswana, giving it an effective project interest of 50.96%.

    Following an airborne survey and follow-up groundwork in 2019, five targets have been selected at the MFC project as a focus for an initial drilling programme. Power Metal describes these targets as highly conductive bodies that “could potentially be host to massive nickel sulphides” due to their location, geology, and associated magnetic responses.

    Finally, a third London-listed firm operating in the nickel space is Regency Mines (LSE:RGM). Following a significant management shakeup last year in the wake of a challenging period, the organisation plans to push forward at its flagship, 50%-owned Mambare nickel-cobalt project in Papua New Guinea. Mambare covers 256 square kilometres and contains a compliant resource of 162.5 million tonnes at 0.94% nickel and 0.09% cobalt.

    A valuable investment opportunity

    The macro trade winds for the price of nickel look highly favourable. Given that Indonesia’s export ban will come into force imminently, supply is inevitably going to tighten this year. Meanwhile, the Federal Reserve’s hesitancy around raising interest rates any further this year is likely to cause further dollar weakness- a generally bullish force for commodities.

    In parallel, 2020 is also expected to welcome in a great deal of EV market growth, putting further upward pressure on nickel prices. Following the nickel sell-off in the last quarter of last year, this could open up a valuable investment opportunity – especially given that stocks operating in the nickel market generally fell alongside the base metal. If the bullish outlook for nickel materialises into another price rally, it stands to reason stocks with nickel exposure will follow suit.

    Given the stage of Araguaia’s development and the potential for news flow from Vermelho, Horizonte Minerals offers low risk and potentially sizeable returns at 3.1p (as at 21 January 2020). Power Metal, on the other hand, is a racier option. However, after raising £700,000 in December, the organisation has the funding in place to deliver exploration progress.

    If looking to take a punt on nickel having another bumper year, these two stocks could present significant upside to your portfolio.

    Author: Daniel Flynn

     

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance