Vermelho

  • 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 well positioned to see out coronavirus as Araguaia work continues (HZM)

    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

    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

  • 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.