TIDMHZM
RNS Number : 8804Q
Horizonte Minerals PLC
23 October 2023
NEWS RELEASE
23 October 2023
HORIZONTE MINERALS PROVIDES Q3-2023 CONSTRUCTION UPDATE
HIGHLIGHTS
-- Construction progress continues to be made at Araguaia
o Strong safety performance, no lost time injuries with close to
5.1 million hours worked
o Rotary Kiln sections have been installed on the support
piers
o The furnace shell is complete with roof installation
underway
o All critical equipment packages have been contracted and are
either on site or en route to site
o As of 30 September, 138,000 tonnes of ore averaging 1.92% Ni
has been stockpiled
o Commissioning of the 126 km (230kV) power transmission line
underway
-- US$429 million has been spent at Araguaia as of 30 September 2023
-- As stated on 2 October 2023, Reta Engenharia has been
retained to complete a detailed capital cost and schedule analysis
which is expected to be completed by mid Q4-2023
-- The Company is continuing to progress construction activities
while advancing financing discussions with its cornerstone
shareholders and lenders
-- Araguaia Nickel Project Line 2 Feasibility Study ("FS"),
which aims to double nickel production from 14,500 tonnes per annum
to 29,000 tonnes per annum, to be published in mid Q4-2023
Horizonte Minerals Plc (AIM/TSX: HZM) ("Horizonte" or the
"Company"), the nickel company developing two Tier 1 assets in
Brazil, reports that construction activities continue to progress
well at its Araguaia Nickel Project ("Araguaia" or "the Project").
As of 30 September 2023, US$429 million has been spent on Araguaia
with progress made across key work fronts and no interruptions to
date on construction activities.
As stated in the press release dated 2 October 2023, a number of
factors arising from the completion of the detailed engineering
work has led to an increase in material and quantities, scope
changes, increased costs around the main electromechanical erection
contract and increased duration on delivery schedule. These changes
require additional financing resulting in an expected increase in
the overall Project capital requirement by at least 35% (from the
current capex budget of US$537m) and delay of first production to
Q3-2024. Reta Engenharia is expected to complete its capital cost
and schedule analysis report, following which an independent
technical advisor, nominated by Senior Lenders will review the
updated costs with targeted completion by mid Q4-2023.
Jeremy Martin, CEO of Horizonte, commented: "Despite the current
challenges, I am pleased to report that construction activities at
the Araguaia Project continue to progress well, with a strong
safety performance to date.
"Notwithstanding the expected increase in capital, the Araguaia
project remains a Tier 1 nickel project with lower quartile C1 cash
costs, and a long mine life of 28 years producing a high grade, low
impurity FeNi product. Discussions with the Company's major
shareholders and lenders to fund the project to completion are
progressing."
CAPITAL COST REVIEW PROCESS
Reta Engenharia's detailed capital cost and schedule analysis is
on-going, with the updated estimate being assessed to meet the
requirements of AACEI Class 1, improved from the estimate utilised
in September 2022.
Principal capital changes are linked to the following:
-- Civil works: the development of engineering maturity and
identification of new scopes to the project resulted in increases
in civil quantities (concrete, rebar and formwork) and the
corresponding rise in the installation costs. These changes relate
to the water storage reservoir, the water abstraction pipeline,
selected major equipment packages and equipment interfaces.
-- Electromechanical (EM) assembly: increased equipment and
materials quantities have resulted from the completion of the
critical detailed engineering, and the shift of more EM activities
into the wet season given the expected delay to 3Q-2024. This
represents a significant percentage of the cost increase given the
lower productivity in the wet season and increased quantities.
-- Refractory: the cost to install 4.3 kt of refractory was significantly underestimated.
-- Vendor delays: one of the vendors have not been able to
deliver key packages in line with the project timeline leading to
termination of the contract and the sourcing of alternatives at
higher prices.
-- Schedule extension: given the above and the expected schedule
delay of around six months, there is an associated increase in
costs and working capital linked to the increased schedule
duration.
More detailed information will be given once the final
engineering study is complete by mid Q4-2023.
PROJECT FINANCING ACTIVITIES
As of 30 September 2023, a total of US$429 million has been
spent on construction at Araguaia.
As of 30 September 2023, US$215 million has been drawn down from
the senior secured project finance debt facility of US$346 million
(the "Senior Debt Facility"). As of 30 September 2023, the Company
had total liquidity sources of US$253 million comprised of US$131
million undrawn on the Senior Debt Facility and a Group cash
position of US$122 million. Of the Group cash position, US$93m
relates to the project to cover current construction activity and
working capital which includes the full draw down on the Cost
Overrun Facility of US$25m as well as US$5m cost over run equity.
The cash balance is committed to near term capital expenditures.
US$16m of the Group cash position is segregated for the development
of Vermelho with the balance of US$13m spread amongst other
entities for the ongoing running of the Group.
The remainder of the undrawn Senior Debt Facility of US$131
million is intended to be used to fund current project capital
costs, and in order to draw down on the Senior Debt Facility, all
conditions precedents must be satisfied including a cost to
complete analysis. With the estimated increase in overall Project
capital, the Company is working closely with its senior lenders and
its cornerstone shareholders on a financing solution to solve the
funding gap. The Company's objective is to put in place a financing
solution which will satisfy the cost to complete requirements and
thereby allow the Company to continue to access its Senior Debt
Facility.
The senior lenders and the independent technical engineers were
on-site on 4 October 2023 undertaking a review of construction
progress to date.
Management discusses the Araguaia Water Storage Reservoir with
Senior Lenders and the independent technical engineers.
ARAGUAIA NICKEL PROJECT STATUS UPDATE
Health, Safety & Wellbeing
The lost-time injury frequency rate ("LTIFR") for Araguaia as of
30 September 2023 was 0.00 and the total recordable injury
frequency rate ("TRIFR") was 0.70 per million hours worked,
comparing favourably to a TRIFR of 2.1 for the same period last
year. As of 30 September 2023, more than five million hours of work
had occurred directly on the Araguaia construction project, without
a lost time injury.
Horizonte continues to focus its safety programmes on critical
risk controls, safe behaviours and risk management. During the
Project's life to date, over 7,600 internal safety audits have been
conducted and more than 11,000 safety plan observations have been
completed. To increase engagement and participation by our
contracting partners in our safety systems and processes, we
continue to monitor and report on individual partner company
performance on a range of indicators and undertake interventions as
necessary to ensure zero harm.
Construction activities
An overview of the Araguaia Nickel process plant site.
The ore homogenisation building has all the structural steelwork
in place with the cladding of the roof underway. The framework for
the overhead tripper conveyor that runs the full length of the shed
has been installed and once commissioned, will feed crushed ore
onto the two blended stockpiles. Each stockpile will be 90m long,
30m wide and around 13m in height, with a combined capacity of
36,000 wet tonnes of ore. Completion of the mechanical construction
of the homogenisation building is planned for early February 2024
when commissioning is expected to begin. Ahead of this, the belt
conveyor, cables and piping will be installed.
All the structural steelwork is in place on the ore
homogenisation building, with the cladding of the roof
underway.
The 42m long Rotary Dryer has been lifted onto its support piers
for final alignment and completion ahead of internal and external
welding. Commissioning of the Rotary Dryer mechanical assembly is
scheduled to begin by year end. Steelwork is currently being
erected and will support auxiliary equipment including the
electrostatic precipitator, dry ore feed bins, dry ore discharge
and tertiary crusher. Other key parts currently being erected
include the gear assembly, installation of the driver and
lubrication system.
The Rotary Dryer (foreground) is scheduled for commissioning by
year end.
All eleven sections of the FLSmidth Rotary Kiln have now been
lifted onto the support piers and the bearing guide rings have been
installed, ahead of final alignment and welding. Measuring 110m
long and 5.5m wide, the Rotary Kiln will produce calcine that is
transferred to the Electric Arc Furnace at a rate of around 115 dry
tonnes per hour at an exit temperature of around 800(o) C.
Equipment that is due to be installed over the next two months
includes the gear assembly, the shell driver and lubrication
system. Preparation for the refractory lining and the installation
will commence in December 2023.
The Rotary Kiln installed on the support piers with main roller
bearing guide rings visible.
The Electric Arc Furnace shell is complete, and the roof
sections are on site with erection underway. The electrical
transformer has been positioned within the furnace building and the
nine calcine feed bins have been installed. As of 30 September
2023, around 2,500t of steel has been erected in the furnace
building, with the fifth and final level in place. The next phase
of work underway are the installation of the calcine feed bin
covers and the electrodes. Refractory installation is expected to
commence in Q1-2024, starting around the feed pipes before focusing
on the internal lining of the circular 18m by 7.25m furnace.
The Electric Arc Furnace building in the centre with the
electrical transformer being positioned on the second level, to the
left of the image is the refinery building.
Following the granting of Araguaia's mining authorisation in
mid-2023, mining has progressed well with around 138,000 tonnes of
ore stockpiled and categorised on the run-of-mine (ROM) pad as of
30 September 2023, averaging 1.92% Ni. By year end, the Company
anticipates having stockpiled around 250,000 tonnes, at an average
grade of 1.90% Ni, in line with the target for the year.
Mining at the Pequizeiro pit showing the excavators currently in
the high-grade transition zone. The processing plant is shown in
the background approximately 500m from the mine.
Around 138,000 tonnes of ore stockpiled and categorised on the
ROM pad as of 30 September 2023.
Power infrastructure
All 260 transmission line towers have been erected and the
entire 126km of conductor cable installation has been completed.
Commissioning of the 230kV power transmission line from the
Xinguara Bay substation to the Araguaia project has begun and is
due to be concluded by February 2024.
Out of a total of 260 transmission towers:
-- 260 foundations have been poured (100% complete)
-- 260 towers have been erected (100% complete)
-- 126km of conductor cable installation has been completed
(100% complete)
The Araguaia sub-station with both of the main 230kV/34.5kV
transformers installed.
At the Xinguara Bay substation:
-- Engineering is complete
-- Procurement and civil works well advanced
-- Electromechanical erection is advancing, targeting completion
by year end.
A technical inspection was undertaken by the Pará State
Secretariat for Environment and Sustainability ("SEMAS") in late
August 2023 in anticipation of the powerline commissioning and the
issuance of the Operating Licence.
Water storage reservoir
The Water Storage Reservoir (WSR) continues to advance with
Cofferdam construction now completed. Construction of the principal
embankment is underway with jet grouting expected to be concluded
mid-November. A delay in completion has been driven by the
requirement for additional jet grouting to address geotechnical
conditions. The Company is targeting year end to commission the
WSR, and once complete, the WSR will provide a constant source of
cooling water to the process plant and act as a heat sink for the
furnace.
Water Storage Reservoir where the Cofferdam is now completed and
construction of the principal embankment is underway.
Contracts & Procurement
All critical equipment packages have been contracted and are
either on site or en route to site with around 90% of procurement
now complete. Over three quarters of the smaller, non-critical
auxiliary packages have been contracted, with items such as
consumables and workshop equipment under tender. All remaining
packages are expected to be finalised by year end following which
the Contract and Procurement teams focus will be on ensuring all
materials and equipment are delivered safely to site, in line with
the updated project schedule.
Engineering
As of September 2023, engineering had reached 99.8% for first
issue of drawings and 93% for issue for construction (IFC).
Engineering still to complete relates to utilities for the
Nitrogen, Oxygen, LPG and Diesel Fuel EPC supplier packages which
are not on the critical path.
Environmental activities
Within the quarter, the Company completed the sealing of roads
adjacent to five small rural villages and additionally implemented
enhanced dust suppression in localities proximal to residential
areas. Horizonte has remained actively engaged with these rural
communities and results of automatic air quality monitoring
stations and, importantly, feedback from these communities, now
indicates that dust management protocols are effectively addressing
construction related increases in road traffic.
Beyond Horizonte's investment of over BRL 50m in state and
municipal road upgrades in 2022 - including widening, capping,
safety controls and bridge upgrades, making what were previously
poor quality roads safe for increased levels of activity - and the
BRL 3.9m spent on surfacing near rural villages, the Company made a
further commitment to support the Municipality in its commitment to
seal 2 km of state road at the outskirts of the Conceição do
Araguaia urban area. The Company has now completed tendering and
expect these works to commence in Q4 2023.
In other environmental management activities, Horizonte
concluded a major programme of impact avoidance in the period,
confirming the re-design of the Pequizeiro stockpile to avoid 49 ha
of native vegetation. This important project enhancement means that
in terms of overall Araguaia land take, almost three quarters of
the land disturbance will be restricted to highly modified
pastureland. In line with biodiversity commitments, Horizonte
continues to explore further opportunities to avoid biodiversity
impacts. Also in the period, the primary flora and fauna rescue
activities, conducted by specialist botanists and zoologists
associated with the Araguaia development were completed. These
highly successful programmes have, since construction commencement,
resulted in the registration of over 1,200 animals, as well as
collection of over 19kg of seed from 43 species for mine site
reclamation and farm afforestation.
Social management
In conjunction with the management of construction related
impacts, several programmes continued in the quarter to enhance the
benefits that can be realised by host communities from the
long-term presence of Horizonte in the area. In July 2023 the first
group of local companies participating in our Supplier Development
Programme concluded their formal training and mentoring phase of
the programme. The second group of local companies commenced
training in August 2023 and included smaller rural communities of
Chapéu de Palha and Vila Joncon. The objectives of this programme
are to increase participation by local companies in the Horizonte
supply chain, to maximise retention of value by host communities
and stimulate market growth and economic diversity.
In relation to the Araguaia Resettlement Action Plan, as at the
end of the quarter, five project affected households had been
successfully resettled to their new homes. Families involved in the
resettlement programme commenced the first phase of agroecology
focussed training covering topics including rural property
management, sustainable farm management and soil preparation.
The Company Health Promotion and Prevention Programme during the
period included training for school students on relevant social and
health issues including mental health, child protection and rights,
and teen pregnancy. These educational activities supported formal
curriculum aligned education on youth multipliers in health.
Permitting
September 2023 saw the submission of numerous reports to the
environmental regulator ("SEMAS") illustrating compliance with
various Installation Licence (construction) conditions. In Brazil,
environmental licencing follows a three-stage process: i)
preliminary licence (LP) issued following assessment and
acceptability of the project proposal and impact assessment; ii)
installation licence (LI) allowing construction and other
preliminary development, such as pre-stripping; and iii)
operational licence (LO), allowing the use and operation of the
constructed/developed infrastructure. The submission of documents
demonstrating compliance with an Installation Licence is a
regulatory predecessor for issuance of the related Operational
Licence. Key submissions related to: the Arraias River water
pipeline (that will transmit water for the filling of the water
storage reservoir); the 230kV transmission line (operational
electricity supply); and temporary fuel station (fleet fuelling and
process plant commissioning).
Horizonte has received all required project approvals relevant
to this phase of the Araguaia project and does not anticipate any
issues in relation to issuance of operational licences. In the
reporting period Horizonte also submitted compliance documentation
in relation to the mining authorisation awarded to the Company in
Q2-2023, allowing the commencement of mining and stockpiling of
ore.
ARAGUAIA LINE 2: FEASIBILITY STUDY EXPECTED IN Q4 2023
The results from the Feasibility Study on Araguaia Line 2 remain
on track to be published in mid Q4-2023. The combined production of
Araguaia Line 1 and 2 is expected to be 29,000 tonnes per
annum.
VERMELHO NICKEL-COBALT PROJECT
The FS for Horizonte's 100% owned Vermelho project in Brazil is
currently on-going. Vermelho has a high-grade scalable resource
with a long mine life. Given Vermelho's geological characteristics,
the ore has the ability to be processed either through
High-Pressure Acid Leach ("HPAL") or Rotary Kiln Electric Furnace
("RKEF") technologies. As part of the study and driven by the
evolving market dynamics, Horizonte is evaluating the optimal final
nickel product that will supply the critical metals market.
For further information, visit www.horizonteminerals.com or
contact:
Horizonte Minerals plc info@horizonteminerals.com
Jeremy Martin (CEO) +44 (0) 203 356 2901
Simon Retter (CFO)
Patrick Chambers (Head of IR)
Peel Hunt LLP (Nominated Adviser & Joint
Broker)
Ross Allister
David McKeown
Bhavesh Patel +44 (0)20 7418 8900
BMO (Joint Broker)
Thomas Rider
Pascal Lussier Duquette
Andrew Cameron +44 (0) 20 7236 1010
Barclays (Joint Broker)
Philip Lindop
Richard Bassingthwaighte +44 (0)20 7623 2323
Tavistock (Financial PR)
Jos Simson
Cath Drummond +44 (0) 20 7920 3150
ABOUT HORIZONTE MINERALS
Horizonte Minerals Plc (AIM/TSX: HZM) is developing two
100%-owned, Tier 1 projects in Pará state, Brazil - the Araguaia
Nickel Project and the Vermelho Nickel-Cobalt Project. Both
projects are high-grade, low-cost, with low carbon emission
intensities and are scalable. Araguaia is under construction and
when fully ramped up with both Line 1 and Line 2, is forecast to
produce 29,000 tonnes of nickel per year. Vermelho is at
feasibility study stage and is expected to supply nickel to the
critical metals market. Horizonte's combined production profile of
over 60,000 tonnes of nickel per year positions the Company as a
globally significant nickel producer. Horizonte's top three
shareholders are La Mancha Investments S.à r.l., Glencore Plc and
Orion Resource Partners LLP.
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 any planned
acquisition of equipment, statements with respect to the potential
of the Company's current or future property mineral projects; the
ability of the Company to complete a positive feasibility study
regarding the second RKEF line at Araguaia on time, or at all, the
ability of the Company to complete a positive feasibility study
regarding the Vermelho Project on time, or at all, the success of
exploration and mining activities; cost and timing of future
exploration, production and development; the costs and timing for
delivery of the equipment to be purchased, 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
realization of mineral resource and reserve estimates and achieving
production in accordance with the Company's potential production
profile or at all. 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 any planned acquisition of
equipment on time or at all, the ability of the Company to complete
a positive feasibility study regarding the implementation of a
second RKEF line at Araguaia on the timeline contemplated or at
all, the ability of the Company to complete a positive feasibility
study regarding the Vermelho Project on the timeline contemplated
or at all, 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, and various risks associated
with the legal and regulatory framework within which the Company
operates, together with the risks identified and disclosed in the
Company's disclosure record available on the Company's profile on
SEDAR at www.sedar.com, including without limitation, the annual
information form of the Company for the year ended December 31,
2022, and the Araguaia and Vermelho Technical Reports available on
the Company's website https://horizonteminerals.com/. 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.
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END
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