Horizonte inks royalty agreement to fund Araguaia project
Aim- and TSX-listed nickel company Horizonte Minerals has signed a royalty agreement with Orion Mine Finance that will provide it with an upfront cash payment of $25-million for the development of the Araguaia ferronickel project, in Brazil.
Orion will have a 2.25% royalty on the first 426 429 t of contained nickel within the final product (ferronickel) produced and sold. This is equivalent to the nickel production estimated over the life-of-mine for Araguaia in the Stage 1 feasibility study.
The feasibility study for the Araguaia project describes an initial production phase where about 900 000 t/y of ore is treated in a rotary kiln electric furnace (RKEF) to produce about 14 500 t/y of nickel contained in 52 000 t/y of ferronickel.
The study includes an option to double production to 29 000 t/y of contained nickel by the addition of a second RKEF in the third year of the project.
Horizonte CEO Jeremy Martin said on Thursday that the royalty agreement would enable the company to build out its owner's team, advance engineering and early works packages as it proceeded to the start of full construction at the mine.
“This royalty financing is non-dilutive for shareholders, and has been predesigned to be compatible with the project funding package.”
The company requires $443-million for the initial phase of the project, which has an after-tax net present value (NPV) of $401-million, an internal rate of return of 20.1% with cash costs equivalent to $3.08/lb of contained nickel.
With nickel prices rising sharply – up almost 50% this year – Araguaia currently has a NPV of more than $580-million, Martin noted.
Stock in the company skyrocketed in London on Thursday, opening at double the value it closed at the previous day. Horizonte traded at a high of 7p a share in early morning trade, before dipping to 4.62p each before midday. On Wednesday, the company closed at 3.38p a share.
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