Broker Hanson Westhouse maintained its ‘buy’ recommendation and target price of 14 pence for Horizonte Minerals (AIM: HZM) after the Brazil focused gold miner completed an agreement with AngloGold Ashanti for a US$5.3 million exploration alliance, which the broker said provided it with an endorsement from one of the world’s major gold producers that it did have the expertise and experience to make new discoveries.
According to the terms of the three-year agreement, AngloGold will fund the initial US$900,000 twelve month exploration programme aimed at discovering gold mineralisation in Brazil, which will consist of regional prospecting, the identification of regional targets and tenement applications where necessary. Then AngloGold will have the option to either withdraw or continue by dishing out a further US$1.4 million and US$3 million in exploration expenditure over the second and third years respectively.
Horizonte will provide technical and operational management and own 49% of new discoveries. AngloGold will own the other 51% and may elect to earn a further 19% by the funding a given target to pre-feasibility study within three years.
This is the fourth agreement that Horizonte has in place, the others being the Tangara joint venture (JV) with Troy Resources NL, the Pararapa gold project farm-in JV with the world’s largest gold producer Barrick Gold and the project development JV with Brazilian trading company LGA Mineracao e Siderugia Ltda.
HansonWesthouse called the AngloGold agreement “excellent news” as the alliance provided Horizonte with a vehicle to discover and develop new gold projects with the other two JV agreements serving as a “good testament to Horizonte’s strong ability to make new mineral discoveries, providing real value to shareholders.”
Despite the company’s increased share capital after recent placing of 18.5 million new shares at 7 pence to raise a total £1.3 million, Hanson Westhouse left Horizonte’s target price unchanged at 14 pence, reflecting the value of its 49% share of the first 12 month’s exploration expenditure. The value of the company’s Lontra nickel discovery in Brazil has also increased after Hanson Westhouse revised its US Dollar to pound exchange ratio to the current rate of $1.64: £1.00 and updated its nickel forecast to US$18,000 per tonne.
Shares in the company last traded at 7.75 pence, almost half of the broker’s target price.