Stock was placed at virtually no discount thanks to the backing of a “predominantly institutional” base, revealing strong support for Horizonte and its strategy.
The work programme for the definitive study is expected to begin “shortly”, building on the recent pre-feasibility report, which demonstrated the robust economics of the project.
Based in Para state, Araguaia is host to a proven and probable mineral reserve of just short of 25mln tonnes grading 1.77% nickel.
That’s enough to sustain a mine for 28 years at the projected annual output and the pre-feasibility showed would generate free cash of $1.95bn.
Of course, several assumptions had been plugged in to get that number, including a mining cash cost of around US$6,500 per tonne, an average selling price of US$14,000 per tonne, and an initial capital spend of US$354mln.
If Horizonte can demonstrate a viable project once the DFS is complete in around a year, the company has some pretty heavyweight friends on the other end of the telephone.
A more serious criticism might involve the nickel price, which touched 14-year nadir earlier this year, which was way below the $14,000 assumption that underpins that multi-billion dollar cash flow figure.
But here again, Horizonte scores well. For a start, it’s worth noting that even allowing for the recent weakness, the long-term average nickel price over the last 20 years is over $17,000.
Nickel is at historic lows, so if ever there was a time to be buying the metal, now is it.
What’s more, if it was to go into production right now, Araguaia would still be viable, chief executive Jeremy Martin is keen to emphasise.
“At today’s price it still makes good money,” Martin told Proactive recently.
He reckons it would generate $40mln-S$50mln in operating profits.
The company has also modelled for a more conservative long-term average of $12,000 per tonne, and under that scenario the free cash still amounts to $1.26bn.
That Horizonte has managed to survive this long, and not only that but been able to deliver a project that can stand up to today’s tough pricing environment, speaks very well of the company.
It’s run by experienced mining guys, including CEO Martin, who is well-known in City circles, and David Hall, who has the contacts into Teck and used to work for Anglo American for many years.