Horizonte Minerals in talks to fund nickel project overrun

Horizonte Minerals (TSX: HZM) said on Monday that it’s holding talks with major shareholders and lenders to solve the current funding gap for the company’s Araguaia nickel project in northern Brazil.

The company, which began building the mine in May last year, warned earlier this month the project costs had increased by more than a third. It also delayed first production to the third quarter of 2024.

CEO Jeremy Martin said that construction has continued as planned, with milestones including the installation of rotary kiln sections on support piers, the completion of the furnace shell, and roof installation in progress.

As of Sept. 30, Horizonte had spent US$429 million ($586.8 million) on Araguaia, with US$346 million drawn down from the senior secured project finance debt facility, it said.

The company has total liquidity sources of US$253 million, comprising US$131 million undrawn on the debt facility and cash of US$122 million.

The project had, by the end of last month, stockpiled 138,000 tonnes of ore averaging 1.92% nickel. The miner said that commissioning a 126-km, 230-kilovolt power transmission line was underway.

Ferro nickel produced from Araguaia pilot plant. Credit: Horizonte Minerals

“Notwithstanding the expected increase in capital, the Araguaia project remains a Tier 1 nickel project with lower quartile C1 cash cost and a long mine life of 28 years, producing a high-grade, low impurity iron/nickel project,” Martin said.

The executive noted the company had retained Reta Engenharia to conduct a detailed capital cost and schedule analysis, set to be completed by the middle of the fourth quarter this year.

An independent technical advisor, nominated by senior lenders, would then review the updated costs.

Horizonte Minerals expects the Araguaia operation, which include an open pit and a processing plant, to produce 29,000 tonnes of nickel a year mostly destined to supply the stainless steel market.

Horizonte shares traded at 29¢ mid-day on Monday in Toronto, valuing the company at $78.2 million. Its shares traded in a 52-week range of 27¢ and $2.88, with shares dropping by 84% on Sept. 29.