Aim- and TSX-listed Horizonte Minerals has entered into an asset purchase agreement to buy certain new and unused ferronickel processing equipment for its Araguaia project, in Brazil.

The company entered into an agreement with Companhia Brasileira de Alumínio (CBA), a company listed on the B3 and controlled by Votorantim, to buy components of a conventional rotary kiln electric furnace plant (RKEF), excluding the furnace.

The equipment is designed and manufactured by leading international vendors with similar capacity and technical specifications to Araguaia and is already located in Brazil at CBA's Niquelândia operations.

Horizonte said it planned the use of selected components as spares and back-up as part of the development of the first RKEF line at Araguaia, but that the real value in using some of the large-scale equipment, including the rotary kiln, would be to fast-track and lower the cost of development of a second RKEF line at Araguaia.

The use of the processing equipment would be integrated into a new study on the development of a second RKEF line at Araguaia.

Horizonte will pay $600 000 upfront in cash for the equipment. The agreement provides for a total consideration of up to $7-million, with the balance payable upon the achievement of future milestones related to the development and operation of Araguaia.

“The acquisition of the processing equipment is a compelling opportunity for Horizonte to fast-track the development of a second RKEF line at Araguaia, to reach 28 000 t of nickel a year, and at a lower development cost. We expect to be able to realise significant savings on our planned development costs given the low-cost acquisition of this high-quality equipment relative to the original purchase cost of approximately $60-million,” said Horizonte CEO Jeremy Martin.

Votorantim commissioned the design and manufacture of the processing equipment in 2006, as part of a proposed $250-million ferronickel development at Niquelândia. The project was expected to have an initial mine life of 20 years, with a capacity of about 42 000 t/y of ferronickel, or about 10 000 t/y of contained nickel. However, construction was halted due to the fall in nickel prices in 2009. The project was placed on care and maintenance during construction and ultimately never completed.

Phase 1 of Araguaia is fully funded with the company recently announcing a $633-million funding package for the development of the first RKEF line.