Horizonte Minerals Plc (LON:HZM) continues with development work at the Araguaia nickel project in Brazil.
The plan is to produce around 14,500 tonnes of nickel per year, making the project a Tier 1 asset in terms of size and grade, sitting firmly in the upper end of the global grade curve.
Araguaia is targeting nickel production by 2019, aligning the project ideally with a predicted increase in nickel price over the mid-term.
Araguaia project will generate US$1.3bn in free cash
Horizonte’s updated Pre-Feasibility Study demonstrates that its enlarged, 100% owned Araguaia project is one of the largest and highest grade undeveloped nickel saprolite resources globally.
READ: Feasibility study at Horizonte Minerals’ Araguaia project now at an ‘advanced stage’
It will generate US$1.3bn in free cash flow over the life of the mine.
Having combined Glencore’s adjacent nickel project with its own Araguaia project in a low-cost acquisition, the economics highlight a post-tax NPV of U$328mln and IRR of 19%, based on a long-term nickel price of U$12,000 per tonne.
However, using the bank’s consensus of a mid-term nickel price of US$14,000 per tonne, the NPV increases to US$581mln with an IRR of 26.4%.
Strong institutional shareholder base
Horizonte company has a strong institutional shareholder structure, which includes Teck Resources Limited (17.9%), Lombard Odier Asset Management (14.1%) JP Morgan (8.4%), Hargreave Hale (6.4%) and Glencore (6.4%).
Feasibility study underway
A Feasibility Study is now underway, due for publication in early 2018, 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.
New nickel-cobalt limonite resource adds greater depth to mineralised base at Araguaia
The addition of a 20.7mln tonne limonite resource to the existing 120mln tonne measured and indicated resource adds a new element into the mix – cobalt.
At a grade of 1.13% nickel and 0.12% cobalt, the grade is attractive enough, and add up to an additional 515mln pounds of nickel and 25,580 tonnes of cobalt.
These resources are not part of the current mine plan or ongoing feasibility study, but go to demonstrate the longer-term upside potential of the project.