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Horizonte Minerals PLC: DEEP DIVE

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 ferronickel mine in Brazil

  • Feasibility study estimates net present value of mine at US$401mln

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

  • First metal expected in 2022

  • Second project being tested for battery quality nickel hydroxide

  • Broker share price targets range from 8p to 21p per share


What Horizonte does

Horizonte Minerals PLC (LON:HZM) is quoted on AIM and the TSX.

The 100%-owned Araguaia nickel saprolite project in Brazil is its flagship project.

Horizonte also recently acquired the nearby Vermelho nickel-cobalt project from Vale.

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.

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

Test work is underway to see if the material is pure enough for the electric vehicle (EV) battery market.

Alternatively, Horizonte is looking for a high-grade ferro-nickel source, which could potentially be treated at the Araguaia plant or at a new standalone facility at Vermelho.

What the boss says

"Subject to funding, the company is now in a position to commence construction with the necessary environmental permits approved, including water abstraction permits issued in 2018,” said chief executive Jeremy Martin.

Vermelho has the potential to supply raw materials into the battery industry, he adds.

“The outlook for the nickel market is robust, with demand growing at around 5% over the next three to five years from both the traditional stainless-steel sector as well as new demand from growth in the electric vehicle battery market.”

Inflection points

  • Funding for construction of Araguaia (second quarter 2019)

  • 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.

Numis assumes Horizonte will fund construction through a combination of US$240m of equity and US $250m of debt.

A preliminary economic assessment for Horizonte’s neighbouring Vermelho deposit, which will produce battery grade nickel hydroxide rather than ferronickel for steel, should give the company’s value an additional boost.

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 2.3p currently, Horizonte’s market value is £33mln.

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Horizonte Minerals PLC Timeline

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Broker share price targets range from 8p to 21p per share

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