Results from the FS were first announced at the end of October and showed that over a 28-year mine life Araguaia will generate US$1.6bn in cash flows.
It also showed Araguaia to have a post-tax net present value of US$401mln and an internal rate of return of 20.1%. The capital cost estimate stands at US$443mln, including US$65.3mln of contingencies.
Production during stage 1 is expected to average 14,500 tonnes of nickel per year, but it reckons it can double this with the addition of a second rotary kiln electric furnace process line after three years.
The stage 2 expansion, which would not increase upfront capital costs and would be funded through operational cash flow, would support a 26-year mine life generating pre-tax cash flows of US$2.6bn.
“The successful completion of the Feasibility Study and the positive economics from the Stage 2 expansion all confirm that Araguaia is a tier 1 asset demonstrating flexibility and scalability with compelling economics,” said chief executive Jeremy Martin.
He added: “The recent weakness in nickel prices appears to be reflection of macroeconomics and does not appear to have impacted wider consensus of the positive future potential of the nickel market. Demand versus supply deficits remain forecast for the short term.”
Nickel prices should be higher
In a note to clients, analysts at 'house' broker Shore Capital noted that they share the view with many other industry watchers share that nickel prices should be significantly higher than spot in the medium term, the question being exactly how much higher.
They noted that Horizonte’s NI 43-101 reported that Consultant Wood Mackenzie (WoodMac) has a long-term incentive price forecast of US$26,450 per tonnes.
The analysts said: “As we understand it, this assumed the primacy of plug-in hybrids, which we disagree with - there is ever-mounting evidence that consumers (and carmakers) are favouring ‘full electric’ cars, and we therefore expect that WoodMac will be forced to revise upwards its long-term price at some point.”
They also noted that Horizonte’s economics are superior to that reported recently by leading developers of HPAL (High Pressure Acid Leach) nickel projects.
Horizonte shares fell 3.8% to 2.05p in late morning trading.
-- Adds analyst comment --