Horizonte adapting to the times

Having put out a PFS in October that showed the project could breakeven at a US$9,426 per tonne nickel price (on an 8% discounted net present value basis), the company is finally able to look forward with its project and benefit from some positive market sentiment.The rising nickel price – up to $11,155/t on Monday from $7,550/t earlier this year – and the ticking off of several project milestones, have boosted Horizonte. Its London-listed share price is up 45% year-to-date and the company is looking to capitalise on this with a November fundraising.Horizonte plans to tap the London and Toronto markets for £9 million (US$11.2 million) by the end of this month to build on the PFS with a definitive feasibility study on its nickel saprolite project in Pará state.This raising, which according to CEO Jeremy Martin could see two “tier-one” institutions join a register that already includes Teck Resources (CN:TCK.A), Henderson Global Investors, Glencore (LN:GLEN) and Anglo Pacific Group (LN:APF), will potentially underscore Horizonte’s relevance in the future nickel market.“If you look at the story today, it [the raising] is a pretty compelling entry point,” Martin told Mining Journal. “We have created one of the largest undeveloped saprolite nickel projects out there today.”According to the latest PFS, the US$354 million project would produce an estimated 14,500 tonnes per annum of nickel in ferronickel over a 28-year life, at a C1 cost of US$6,948 per tonne. This would provide a post-tax net present value (8% discount) of US$328 million at a US$12,000/t nickel price.While these numbers are mediocre by the standards of gold or lithium projects being developed today, they are a big improvement on the company’s previous efforts.""We have created one of the largest undeveloped saprolite nickel projects out there today""The previous PFS iteration envisaged a US$582 million capital expenditure project producing 15,000tpa of nickel in ferronickel, providing an NPV (8% discount) of US$519 million at a US$19,000/t nickel price. This study was an update on an even larger US$1.4 billion project that would produce 40,000tpa of nickel in ferronickel and only work in a higher price environment.As the nickel price has fallen, Horizonte has adapted its plan to the environment it finds itself in. And, in fact, the economics the company is now pushing – with a 24.6 million tonne (1.77% Ni) reserve base, thanks to the acquisition of Glencore’s neighbouring project – compare well to its only peer of note in the sector.RNC Minerals (CN:RNX), which has the Dumont nickel project in Quebec, Canada, on its books plans to build a US$1.2 billion project that could produce 47,000tpa of nickel at full capacity. Unfortunately, the project only breaks even – on an 8% discounted NPV basis – at a nickel price of US$15,435/t. It is no wonder the company has recently renamed itself and branched out into gold in Australia.The scarcity of projects, plus the emergence of numerous nickel price bulls – Macquarie recently marked the metal out as the commodity to watch over the medium term as Chinese nickel pig iron producers curb output – has seen Horizonte’s stock increase in value and prominence.“The fundamentals behind the nickel market are compelling and if you want exposure to nickel, there are very few places you can go to in the junior market,” Martin said.On top of this, the feasibility study could see the economics improve once again at Araguaia, according to Martin.He lists the US$354 million capital cost number, which currently uses a “conservative” Brazilian real to US dollar exchange rate and could be cut further with improvements on the infrastructure and plant side, as one area for a potential economic boost.And, that’s the current plan at Araguaia. This could all change – and quickly – if the nickel price accelerates to the US$15,000/t level Macquarie’s Vivienne Lloyd guided for the end of the decade on the back of further supply shocks from Indonesia and the Philippines.“Maybe in 18, 24, 36 months’ time, the nickel price might be US$14,000-15,000/t and people want to see increased capacity,” Martin said. This could see the company go back to previous engineering studies with higher output and amend the project again.“It is already modelled in,” he said.Even if the price rise doesn’t materialise, Horizonte will keep adapting.

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