TIDMHZM
RNS Number : 6620Q
Horizonte Minerals PLC
21 February 2019
NEWS RELEASE
21 February 2019
HORIZONTE MINERALS Q1 2019 SHAREHOLDER UPDATE
Horizonte Minerals Plc, (AIM: HZM, TSX: HZM) ('Horizonte' or the
'Company'), the nickel development company focused in Brazil, is
pleased to provide the following update to shareholders from CEO,
Jeremy Martin.
Highlights:
-- Araguaia ferronickel project ('Araguaia') Feasibility Study
('FS') completed in Q4 2018 delivering robust economics;
-- Further upside potential with Stage 2 expansion at Araguaia
doubling annual nickel production;
-- Construction Licence recently granted by the Brazilian Pará
State Environmental Agency ('SEMAS');
-- Advancing project financing options for Araguaia;
-- Vermelho nickel cobalt project ('Vermelho') Pre-Feasibility Study ('PFS') underway;
-- Nickel showing positive fundamentals with midterm consensus
pricing of US$16,792/tonne ('t') Ni for 2022; and
-- Brazil economy set for growth in 2019 and 2020 with GDP set
to increase 2.4% and 2.3% respectively.
Jeremy Martin, Chief Executive of Horizonte, commented:
"The Company made further significant progress in the December
quarter as we work towards developing the Araguaia ferronickel
project and move towards becoming a nickel producer. A major
milestone was the release of the FS demonstrating robust economics
on the single line RKEF process plant which also includes the
option to double annual nickel production through the Stage 2
expansion. The Stage 2 expansion case returned an estimated
post-tax Net Present Value([1]) ('NPV') of US$741 million([2]) and
Internal Rate of Return ('IRR') of 23.8% using the FS base case
nickel price forecast of US$14,000/t([3]) . In January 2019,
following completion of the FS, the Company was awarded the
Construction Licence for the project, which subject to funding,
allows development to commence on the RKEF process plant and
associated infrastructure. It is important to note that Araguaia
does not produce tailings and does not have a tailings dam so is
not affected by the recent ban on new upstream tailings dams in
Brazil.
"Work recently commenced on the PFS for our Vermelho nickel
cobalt project. Snowden Mining Industry Consultants have been
contracted to produce the mining schedules and act as overall study
manager, in addition the Simulus Group based in Perth will provide
detailed design information and costings for the Vermelho process
flow sheet and together with our local Brazilian engineering
partners, will deliver associated infrastructure to the project. In
parallel we have our teams working on the environmental and social
permitting, and new terms of reference have been submitted to
SEMAS, the Brazilian Pará State Environmental Agency to advance
Vermelho's Environmental Impact Assessment.
"Horizonte holds two Tier 1 assets in terms of size and grade;
the development-ready Araguaia ferronickel project and the Vermelho
nickel-cobalt project. Our portfolio is therefore well placed at a
time when demand in stainless steel and electric vehicle markets is
increasing and outstripping new nickel supply coming online.
"2019 is set to be an exciting year for the Company with
multiple value drivers for shareholders all set against a positive
back drop of the broader nickel market and growing Brazilian
economy."
Detailed Information
Nickel Markets
Having fallen from 470,000 tonnes to approximately 200,000
tonnes at present, nickel inventories on the LME have continued to
drop and are now at their lowest levels in five years. Significant
new supply is required for the stainless-steel market which is
growing at around 5% year on year, with further additional new
demand driven from the Electric Vehicle ('EV') battery sector.
Whilst the physical number of EVs on the roads throughout the world
remains relatively low at 3 million cars today, forecasts for the
acceleration of adoptions of EV's vary from 20 to 40 million cars
on the roads by 2030, representing an estimated approximate 10-fold
increase.
At present it is difficult to see where significant new supply
to meet this demand is going to materialize from.
A recent market assessment by Bloomberg New Energy Finance
('NEF') points to nickel supply tightness creating growing anxiety
as battery metal consumers look to draw greater volumes of nickel
from inventory to satisfy demand; "Nickel is now the metal creating
the most concern in the battery manufacturing community", added NEF
analyst, James Frith.
Cathode market leader Umicore SA also notes that supply
constraints could push nickel prices up to as much as
US$20,000-US$25,000/t.
Glencore have forecast that growth in nickel demand would need
to fall to -1% for the nickel market to eliminate the current
structural deficit which is leading to the draw down in nickel
stocks on an ongoing basis.
As we write this, nickel prices remain around US$12,500/t. But
the continued draw down of global Nickel inventory points to a
stronger nickel price environment over the mid-term.
Nickel is a favourite commodity pick amongst multiple
banks/analysts for 2019 and 2020 with all of the large banks
predicting notable price increases by 2021, including:
-- UBS: US$16,500/t in 2021
-- Morgan Stanley: US$16,500/t in 2021
-- Scotiabank: US$17,600/t in 2021
-- Macquarie: US$17,000/t in 2021
Araguaia Ferronickel Project (Araguaia)
In October of 2018, we released the FS for Araguaia. The base
case of the FS uses a flat price of US$14,000/t nickel. The initial
28-year mine life generates free cash flow after taxation of US$1.6
billion with sufficient Mineral Resources beyond the initial 28
year mine life. The financial model indicates an estimated post
tax- NPV of US$401 million and IRR of 20.1%. At operational levels,
Araguaia is expected to produce an average of 14,500t of nickel
contained within approximately 52,000t ferronickel per annum,
utilising proven RKEF technology currently used at over 40 mines
around the world. Using a consensus price of nickel of US$16,800/t,
the post tax NPV increases from IUS$401 million up to US$740
million and the IRR from 20.1% up to 28.1%. Another attractive key
metric of the project is the C1 cash cost, which, at US$8,193/t Ni,
places Araguaia in the lowest quartile for nickel-laterite projects
globally, highlighting Araguaia's robust and competitive operating
costs.
The FS for Araguaia was designed to allow for a second
production line. In December last year we filed the 43-101 report
for Araguaia including the FS results and the potential upside
which could be realised from doubling production by adding a second
line. At 29,000/t per annum production of nickel, the expanded
project would become globally significant production unit. Applying
the FS base case nickel price of US$14,000/t, the Stage-2 expansion
demonstrates a step-change in the economics of Araguaia: increasing
cash flows after taxation from US$1.6 billion to US$2.6 billion;
and NPV from US$401 million up to US$741 million. The expansion
would require no additional upfront capital as the second line
would be funded through reinvestment of free cash flows generated
from the existing operation.
Araguaia is well positioned as one of only a few construction
ready nickel projects in the world. With the average time from
initial discovery to first production approximately 8 to 10 years
for most mining operations, Araguaia represents a unique
opportunity to capitalise on the fundamentals of the nickel market
as highlighted above.
The next step to move Araguaia into the construction phase is a
project finance package. We appointed Endeavour Financial as our
financial advisors, focusing on the debt and offtake development
package for Araguaia. Endeavour Financial is a well-regarded firm
with a strong track record of success in the mining industry,
specialising in arranging multisource financing for single asset
development companies, an example being the recently closed US$750
million financing package for Lundin Gold's Fruta del Norte project
in Ecuador.
Vermelho Nickel Cobalt Project (Vermelho)
The Vermelho project was acquired by Horizonte from Vale in
early 2018, located in the southern part of the Carajás mining
district approximately 140km from Araguaia North. Vale completed a
full Feasibility Study on the project and it was scheduled for
construction in 2006. Following the acquisition Horizonte released
a 43-101 compliant Mineral Resource estimate, in the Measured and
Indicated category, the project contains 167.8 million tonnes
grading 1.01% nickel and 0.06% cobalt (at 0.9% nickel equivalent
cut off), estimated to contain 1.68 million tonnes (3,700 million
lbs) of nickel and 94,000 tonnes (207 million lbs) of cobalt. The
Mineral Resource Estimate places the Vermelho project as one of the
largest, highest grade undeveloped laterite nickel - cobalt
resources globally.
One of the key factors behind the acquisition of this quality
resource was its location and close proximity to Araguaia. The
combined resource base is high-grade, scalable and gives
flexibility to have two potential operating centres, one at
Araguaia as shown in the recent FS and one at Vermelho. Horizonte
now has the potential to develop an annual nickel production of
40,000 to 50,000 tpa nickel per year from Araguaia and Vermelho
within this 100% owned, consolidated nickel district.
There are several phases of work currently underway at Vermelho,
the first is to demonstrate upgrading the mixed hydroxide product
(MHP) to nickel and cobalt sulphate suitable for use in the
evolving EV battery market. The second phase will utilise the high
grade saprolite material to produce ferronickel via the same RKEF
flow sheet as developed at Araguaia. This work will then feed into
a PFS to demonstrate the economic viability of Vermelho on a lower
throughput capacity and capital cost than the operation that Vale
had planned to develop. Additionally, work on the ground has
commenced with updated environmental and social base line data
collection as part of the permitting process.
Brazil
We have always championed Brazil as a stable, established
jurisdiction for operations. In particular the Pará state is pro
mining with the Carajás mining district hosting a number of world
class mines, combined with prospective geology and well-developed
infrastructure, all key factors to allow the low-cost development
of new projects. The Company has received positive government and
community support for Araguaia, culminating in the recent award of
the Construction Licence. Another new positive development is the
up lift in the Brazilian economy. Brazil has tightened control over
inflation rates, which have decreased from 8.8% in 2016 to 3.6% in
2018. The Country has also taken a series of measures aimed to
improve fiscal responsibility, reduced government spending and
increased direct foreign investment.
In 2018, Brazil held a presidential election in which the
front-runner and now president, Mr. Jair Bolsonaro, had committed
to "open the economy" to foreign investors, adopting a pro-business
agenda and taking steps to improve investor confidence in Brazil.
Within this scenario, consumer confidence is at its highest level
since 2014 prompting Forbes to say that "Brazil is the best stock
exchange to invest in right now" (8th January 2019) and the Bovespa
Stock exchange hit its highest point since inception in February
2019.
Following the tragic accident on Friday 25th January at Vale's
Feijão iron ore mine at Brumadinho, Minas Gerais, the Horizonte
team in Brazil and UK send our sincere condolences to those
affected by the event.
It is important to highlight that Araguaia, located
approximately 1,800 kilometres north from Vale's Feijão iron ore
mine, does not produce tailings and has no waste dams on the site.
Araguaia, in line with many other global ferronickel operations,
plans to produce slag in dry granulated pellets which will be
stockpiled and potentially used in road fill as a binder in or
turned into other building products such as blocks or cladding
sheet material.
Detailed Information
For further information visit www.horizonteminerals.com or
contact:
Horizonte Minerals plc
Jeremy Martin (CEO) +44 (0) 203 356 2901
Numis Securities Ltd (NOMAD & Joint Broker)
John Prior
Paul Gillam +44 (0) 207 260 1000
Shard Capital (Joint Broker)
Damon Heath
Erik Woolgar +44 (0) 20 186 9952
Tavistock (Financial PR)
Gareth Tredway
Annabel de Morgan +44 (0) 207 920 3150
About Horizonte Minerals:
Horizonte Minerals plc is an AIM and TSX-listed nickel
development company focused in Brazil. The Company is developing
the Araguaia project, as the next major ferronickel mine in Brazil,
and the Vermelho nickel-cobalt project, with the aim of being able
to supply nickel and cobalt to the EV battery market. Both projects
are 100% owned.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
Except for statements of historical fact relating to the
Company, certain information contained in this press release
constitutes "forward-looking information" under Canadian securities
legislation. Forward-looking information includes, but is not
limited to, the ability of the Company to complete the Acquisition
as described herein, statements with respect to the potential of
the Company's current or future property mineral projects; the
success of exploration and mining activities; cost and timing of
future exploration, production and development; the estimation of
mineral resources and reserves and the ability of the Company to
achieve its goals in respect of growing its mineral resources; the
ability of the Company to complete the Placing as described herein,
and the realization of mineral resource and reserve estimates.
Generally, forward-looking information can be identified by the use
of forward-looking terminology such as "plans", "expects" or "does
not expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases or statements
that certain actions, events or results "may", "could", "would",
"might" or "will be taken", "occur" or "be achieved".
Forward-looking information is based on the reasonable assumptions,
estimates, analysis and opinions of management made in light of its
experience and its perception of trends, current conditions and
expected developments, as well as other factors that management
believes to be relevant and reasonable in the circumstances at the
date that such statements are made, and are inherently subject to
known and unknown risks, uncertainties and other factors that may
cause the actual results, level of activity, performance or
achievements of the Company to be materially different from those
expressed or implied by such forward-looking information, including
but not limited to risks related to: the inability of the Company
to complete the Acquisition as described herein, exploration and
mining risks, competition from competitors with greater capital;
the Company's lack of experience with respect to development-stage
mining operations; fluctuations in metal prices; uninsured risks;
environmental and other regulatory requirements; exploration,
mining and other licences; the Company's future payment
obligations; potential disputes with respect to the Company's title
to, and the area of, its mining concessions; the Company's
dependence on its ability to obtain sufficient financing in the
future; the Company's dependence on its relationships with third
parties; the Company's joint ventures; the potential of currency
fluctuations and political or economic instability in countries in
which the Company operates; currency exchange fluctuations; the
Company's ability to manage its growth effectively; the trading
market for the ordinary shares of the Company; uncertainty with
respect to the Company's plans to continue to develop its
operations and new projects; the Company's dependence on key
personnel; possible conflicts of interest of directors and officers
of the Company, the inability of the Company to complete the
Placing on the terms as described herein, and various risks
associated with the legal and regulatory framework within which the
Company operates. Although management of the Company has attempted
to identify important factors that could cause actual results to
differ materially from those contained in forward-looking
information, there may be other factors that cause results not to
be as anticipated, estimated or intended. There can be no assurance
that such statements will prove to be accurate, as actual results
and future events could differ materially from those anticipated in
such statements.
[1] NPV calculated using 8% discount rate
[2] USD/BRL 1/3.5 exchange rate applied for life-of-mine
[3] Wood Mackenzie Short term forecast - refer to market section
of Araguaia NI 43 -101:
https://horizonteminerals.com/news/en_20181212_araguaia_ni_43-101_technical_report.pdf
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
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contact rns@lseg.com or visit www.rns.com.
END
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