Nickel company Horizonte Minerals has confirmed the economics of its Araguaia ferronickel project, in Brazil, with the completion of a feasibility study, setting up the company to advance offtake agreements and secure funding for the $443-million development.
The Aim- and TSX-listed company aims to have its funding plan in place by mid-2019, ensuring that the project could advance on a “rapid” development timeline, targeting first nickel production in late 2021 or early 2022.
CEO Jeremy Martin said on Monday that the project was unleveraged and in a strong position without any agreed offtake, royalty of nickel streams, providing Horizonte with flexibility into the financing process.
He said that Horizonte, which extended the original timeline for the completion of the feasibility study, had aimed to deliver a “conservative piece of work that is financeable and deliverable. We hit all those milestones.”
The study determined that, over an initial 28-year mine life, Araguaia will generate after-tax cash flow of $1.6-billion.
In an interview with Mining Weekly Online, Martin said Araguaia was not dependent on nickel prices rising, as it was based on a flat 14 000 t/y price over its 28-year mine life.
“Even with nickel sitting at the low point that it has dropped down to, the project still makes very good returns and is a robust asset,” he said, noting that the $14 000 t/y base case price assumption was below what many of its peers were using.
The study calculated a net present value (NPV) of $401-million and an internal rate of return (IRR) of 20.1%. Using a consensus mid-term nickel price of $16 800 t/y, the NPV increases to $740-million with an IRR of 28.1%.
Araguaia will produce an average of 14 500 t/y of nickel, contained in about 52 000 t/y of ferronickel, using rotary kiln electric furnace technology. There is potential to double output to 29 000 t/y by the addition of a second process line in future, with a preliminary economic assessment for the expansion under way.
The 14 500 t/y operation will have operational costs of $8 322/t.
Araguaia, as a saprolite resource, will produce ferronickel for the stainless steel industry. Martin said he believed nickel demand would continue to be underpinned by the stainless steel industry over the mid-term, despite much of the focus shifting to the electric vehicle (EV) battery industry.
Araguaia, however, also has a limonite mineral resource, which could be treated to produce products suitable for the EV battery market. Besides this resource, Horizonte’s second development project – Vermelho – could potentially also produce nickel and cobalt sulphate that the EV battery industry used.
Meanwhile, Martin said that Horizonte would be exploring potential synergies between Araguaia and Vermelho to create a 40 000 t/y to 60 000 t/y nickel business.
“We definitely have scope to expand the business and portfolio.”
The London-listed shares of the company closed down 9.7% at 3.3p - its biggest one-day fall in two years.