Feasibility study confirms low cost, long life nickel project at Araguaia, Brazil

Horizonte Minerals, the nickel development company focused in Brazil, has published the results of the feasibility study for the Araguaia ferronickel project in Brazil’s Pará State. The study confirms Araguaia as a Tier 1 project with a large high-grade scalable resource, a long mine life and a low-cost source of ferronickel for the stainless-steel industry.

Araguaia’s FS design allows for future construction of a second Rotary Kiln Electric Furnace (RKEF) process line, with potential to double Araguaia’s production capacity from 14,500 t/y nickel up to 29,000 t/y nickel.

Compelling economic and technical results from the study are expected to support project financing, offtake agreements and future development milestones.

Araguaia’s rapid timeline to production should position it to take advantage of the forecast growth in the nickel market over the short to medium-term.

  • Initial 28-year mine life generates cash flows after taxation of US$1.6 billion with sufficient Mineral Resources to extend beyond 28 years
  • Estimated post-tax NPV of $401 million and IRR of 20.1%
  • Upon development it is expected to produce an average each year of 14,500 t of nickel contained within approximately 52,000 t ferronickel, using the proven RKEF technology currently used at over 40 mines around the world
  • The base case FS economics assume a flat nickel price of $14,000/t for the entire 28-year mine life based on Wood Mackenzie’s short-term forecast
  • C1 (Brook Hunt) cash cost of $3.72/lb of nickel ($8,193/t), making Araguaia a low-cost producer
  • Using the consensus mid-term nickel price of $16,800/t, the post-tax NPV increases to $740 million with an IRR of 28.1%, reflecting the significant leverage that the project returns have to any future increase in nickel prices
  • Capital cost estimate of $443 million (AACE class 3), including $65.3 million of contingencies equating to 17.2% of total capex budget
  • The process plant has been designed to allow for a Stage 2 expansion with the addition of a second (RKEF) process line in the future after the first line is fully commissioned, providing flexibility to double the nickel output. A PEA study is underway for this Stage 2 expansion, expected to be published in late 2018
  • Araguaia is set to deliver significant socio-economic benefits for communities in the Pará state, including over 1,000 direct jobs in the construction phase, and around 500 jobs during operation, as well as additional economic and social development programs
  • The outlook for the nickel market is robust, with demand growing at around 5% over the next three to five years from both the traditional stainless-steel sector as well as new demand from growth in the electric vehicle battery market
  • The company has successfully obtained the Preliminary Environmental Licence and water permit for full-scale operation at Araguaia and is on track to obtain its Construction Licence in Q1 2019.

Horizonte CEO, Jeremy Martin, commented that he was “delighted to deliver the study for the Araguaia ferronickel project. The study represents the most significant milestone in the company’s development to date. From initial discovery by Horizonte combined with the acquisitions from Teck and Glencore, this is the culmination of a long journey and one that not many companies successfully achieve. Horizonte owns one of the largest undeveloped ferro-nickel project’s in the world, in a mining friendly jurisdiction, with good infrastructure and a compelling set of economics as defined in today’s FS.

“The FS shows that Araguaia can be a significant low-cost supplier of nickel in the form of high-grade ferronickel to the stainless-steel industry, over the initial 28-year mine life the operation generates cash flows after taxation of $1.6 billion, delivers an IRR of over 20% and sits on the lower half of the global cost curve.

“The completion of the FS has taken longer to complete than originally forecast. The schedule change was to ensure that the quality of the engineering and other deliverables were to a high standard, and to include the option, within the design, to add a second line that would double the capacity to 29,000 t/y of nickel.

“With the completion of the FS the priority now is to secure project funding and to advance the early works packages. The project is unleveraged and is in a strong position with no agreed offtake, royalty or nickel streams, giving maximum value and flexibility going into the financing process.

“The nickel market fundamentals are positive for the short to long term, driven by robust demand from stainless steel growth and strong electric vehicle (EV) penetration rates. Physical LME metal inventories continue to be drawn down to levels not seen in the last five years. This combined with a lack of new major projects scheduled to come online in the short term, means that this is an opportune time to develop Araguaia.

“I would like to thank the entire Araguaia feasibility study team, who have worked extremely hard to deliver this high-quality study. Horizonte is entering a new and exciting phase of its journey from explorer to developer, with the potential to create substantial value for all stakeholders as highlighted from the results today. I look forward to providing further updates to the market on progress, at both our flagship Araguaia ferro-nickel project and on the Vermelho nickel -cobalt project.”

The wholly owned Araguaia Project is located in the southeast of the Brazilian state of Pará, some 760 km south of the state capital Belém. It comprises an open pit nickel laterite mining operation that mines 27.5 Mt Mineral Reserve of a 119 Mt Mineral Resource to produce 52,000 t of ferronickel (FeNi) (containing 14,500 t of nickel) per year, for the 28-year mine life. The metallurgical process comprises a single line RKEF to extract FeNi from the laterite ore. The RKEF plant and project infrastructure will be constructed over a 31-month period. After an initial ramp-up period, the plant will reach full capacity of approximately 900,000 t/y of dry ore feed. The FeNi product will be transported by road to the port of Vila do Conde for sale to overseas customers.