Horizonte Minerals (LON:HZM) announced a maiden resource of 1.03 million tonnes (Mt) of contained nickel for its wholly owned Araguaia project in Brazil.
The company said that the resource exceeded its expectations and demonstrated the potential to be developed into a major nickel deposit.
The inferred resource estimate from the North, Centre, Pequizeiro, and South zones stands at 76.6 Mt at 1.35 percent nickel and 0.06 percent cobalt and does not include Horizonte's original Lontra nickel project or other exploration targets within the Araguaia project area.
“The maiden resource covers part of the project area acquired from Teck in July 2010, and we believe there is significant scope for expanding this resource from targets within the project area including the original Horizonte discovery at Lontra as well as other defined targets yet to be drill tested," said chief executive of Horizonte Jeremy Martin.
Infill drilling is ongoing with an aim to expand the resource towards a 100 Mt target as well as upgrade and delineate a higher grade core resource within a larger resource envelope, which would be expected to enhance the overall economics of the project.
In addition to that, Horizonte is commencing metallurgical testwork with a view to commencing a preliminary economic study in Q4 2011.
This would then lead directly into a pre-feasibility study “to ascertain the technical and economic potential of Araguaia”.
Investors welcomed the announcement as Horizonte climbed 2% this morning.
Likewise, brokers had a positive response to the news. FinnCap has today initiated coverage of the company, stating that its recent visit to Araguaia showed that the strategy to produce a larger resource in excess of 100 Mt is on track and that the subsequent £8m fundraise in February means that the cash is available to achieve it.
Today’s maiden resource statement topped finnCap’s expectations, “showing the project to be well endowed in both tonnes and grade”.
“With four drill rigs currently turning on the project and a further three rigs due to arrive later this year, we believe that investors in Horizonte can look forward to significant growth in the Araguaia resource in the next 12-24 months,” said finnCap.
The broker valued the stock at 36 pence per share, compared to the current share price of 24.75 pence and below 15 pence at the start of the year.
The initial valuation only considers the current inferred resource at Araguaia at the peer group average of 5 cents per lb contained nickel.