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Horizonte Minerals PLC: DEEP DIVE
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Horizonte Minerals nears construction start at Araguaia in Brazil

Broker share price targets range from 8p to 21p per share
Araguaia mine
OVERVIEW: HZM The Big Picture
First production is scheduled for 2022

• Construction permit granted for Araguaia ferronickel mine in Brazil

• Feasibili​ty study estimates net present value at US$401mln

• Building can start once funding of US$443mln is arranged

• Second project at Vermelho indicates battery quality nickel hydroxide

 

What Horizonte does

 

Araguaia

The Araguaia ferronickel project is in Para State, Brazil.

Phase 1 will see the production of 14.5kt/year of nickel in ferronickel form, with the potential to increase that to 29kt/year through additional capex spending of US$199mln.

First production should be in 2022 with the mine scheduled to run for 28 years.

Capital expenditure for phase I was estimated at US$443mln in last year’s feasibility study with cash costs of US$3.77/lb.

That feasibility study showed Araguaia to have a post-tax net present value of US$401mln and an internal rate of return of 20.1%.

Cash costs are expected to be US$3.77 per pound of nickel, or US$8,193 per tonne, making Araguaia a low-cost producer.

 

Vermelho

Vermelho, a nickel-cobalt project in the eastern part of the Carajás mining district, was acquired by Horizonte in December.

Test work on samples of limonite ore produced a high purity product containing 21.8% cobalt, exceeding the reference grade used for sulphate pricing.

Nickel sulphate was also produced as a solution, ready for purification to final battery grade product.

 

What the boss says: Jeremy Martin, chief executive

"Producing high purity nickel and cobalt sulphate from the Vermelho project of suitable quality and grade for use in EV battery production is a major milestone in the development of the project,” said Horizonte’s Jeremy Martin.

“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.”

 

Video

 

Inflection points

  • Funding for construction of Araguaia

  • Pre-feasibility study at Vermelho

  • Technology advances in nickel battery usage in electric vehicles and energy storage

 

What analysts think

Horizonte’s Araguaia ferronickel project in Brazil has been significantly de-risked by the award of a construction licence, says Numis.

The broker has a price target of 8p on the mining junior with the next catalyst likely to be the arrangement of funding for the Phase 1 development.

Vermelho could provide a second leg to the company in addition to the Araguaia ferronickel project, it adds.

“We value Vermelho at only US$15m and the results of the pre-feasibility study could justify a significant upward rerating.

“The main catalysts for the shares should be securing the project finance package for Araguaia and the publication of the study for Vermelho.”

Numis reiterated a ‘buy’ rating and an 8p target price.

Another broker, Shard, puts Horizonte’s value at a considerably higher 21p per share.

“To be clear, this (the construction licence) means that HZM has all the permits required to start constructing the RKEF processing plant and associated infrastructure, with project funding remaining as the final hurdle,” it said.

 

What it’s worth

At 1.78p currently, Horizonte’s market value is £25.5mln.

 

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