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Horizonte Minerals Plc: THE INVESTMENT CASE

Horizonte Minerals has one of the largest undeveloped nickel saprolite projects in the world

Horizonte has made steady progress in Brazil, and is now on the cusp of releasing a feasibility study for Araguaia
Horizonte Minerals has one of the largest undeveloped nickel saprolite projects in the world
INVESTMENT OVERVIEW: HZM The Big Picture
Trial mining at Araguaia

It’s quite some statement, but Horizonte Minerals PLC (LON:HZM), currently capitalized at around £60mln, is sitting on one of the largest potential new nickel projects in the world.

The combination of the Araguaia nickel project and the recently-acquired Vermelho project, both in Brazil, makes for a compelling proposition. Between them, resources at the two assets amount to over three million tonnes of contained nickel, with significant cobalt potential at Vermelho too.

Araguaia pre-feasibility study shows attractive economics

Horizonte’s recently updated pre-feasibility study demonstrates that Araguaia will generate US$1.3bn in free cash flow over the life of the mine. Having integrated Glencore’s adjacent nickel project in a low-cost acquisition in 2016, the new economics show a post-tax net present value of US$328mln and an internal rate of return of 19%, based on a long-term nickel price of US$12,000 per tonne. At that nickel price, the project is capable of generating over US$1bn in free cash over the 28 year life of mine.

However, using a consensus medium-term price of US$14,000 per tonne, the NPV increases to US$581mln with an IRR of 26.4%. The current price is over US$14,800 per tonne, so there’s already significant upside on the current numbers.

Feasibility study underway

As it stands, the plan is for Araguaia to produce around 14,500 tonnes of nickel per year. A feasibility to firm up the pre-feasibility numbers is now underway, due for completion shortly, which will set the scene for future project funding and construction. This will involve infill drilling over the trial mining site, trial mining to convert probable reserve to proven reserve, and the advancement of off-take discussions.

Good regional infrastructure will aid development

Araguaia is located on the eastern margin of the State of Pará, north-eastern Brazil, to the north of the town of Conceição do Araguaia, south of the main Carajás mining district.

The project has good regional infrastructure including a network of Federal highways and roads, with access to low tariff hydro-electric power. The Carajás mining district, situated approximately 200 km northwest of the Project, is host to a number of major iron and copper mines operated by mining major Vale SA.

Strong institutional support

Several major institutions and mining companies already recognise the potential of Horizonte’s nickel portfolio. Key among the share register are Teck Resources Limited, Lombard Odier Asset Management, JP Morgan, Hargreave Hale and Glencore.

Funded into 2020

Horizonte raised £9.2mln in conjunction with its acquisition of Vermelho from Glencore. In  financials for the quarter ended March 2018, the company estimated that this would be enough to last for 24 months.

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