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Horizonte Minerals outlines plans for second phase expansion at Araguaia

“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”

araguaia
Stage 2 expansion is expected to double production at Araguaia to 29,000 tonnes of nickel per year

Horizonte Minerals PLC (LON:HZM) has filed the NI 43-101 feasibility study of its Araguaia ferronickel project in Brazil on SEDAR.

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. 

WATCH: Horizonte Minerals' Araguaia expansion a 'step-change' in project economics

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 --

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Price: 4.63 GBX

AIM:HZM
Market: AIM
Market Cap: £66.97 m
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Horizonte Minerals secures US$25mln royalty

Horizonte Minerals PLC (LON:HZM) (CVE:HZM) saw its shares rise this week following a US$25mln deal with investment firm Orion Mine Finance to develop its Araguaia nickel project in Brazil.  CEO Jeremy Martin tells Proactive London what the royalty news means for the company and what the...

on 29/8/19

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