Horizonte Minerals Plc, (AIM/TSX:
HZM) ('Horizonte' or 'the Company') the nickel
development company focused in Brazil, is pleased to publish the
results of the Feasibility Study ('FS' or the ‘Study’) for the
Araguaia Ferronickel Project (‘Araguaia’, or ‘the 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 tpa nickel up to 29,000 tpa 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.
Highlights:
- 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 Net Present
Value1 (‘NPV’) of US$401 million2 and Internal Rate of Return
(‘IRR’) of 20.1%;
- Upon development the Project is
expected to produce an average of 14,500 tonnes of nickel contained
within approximately 52,000 tonnes ferronickel per annum, utilising
the proven RKEF technology currently used at over 40 mines around
the world;
- The base case FS economics assume a
flat nickel price of US$14,000 per tonne (‘/t’) for the entire
28-year mine life based on Wood Mackenzie’s short-term
forecast;
- C1 (Brook Hunt) cash cost of
US$3.72 per pound (‘/lb’) of nickel (US$8,193/t), making Araguaia a
low-cost producer;
- Using the consensus mid-term nickel
price of US$16,800/t, the post-tax NPV increases to US$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 US$443
million (AACE class 3), including US$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
Preliminary Economic Assessment (‘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;
and,
- 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.
A version of the announcement containing images
and diagrams is available on our website at
www.horizonteminerals.com
Horizonte CEO, Jeremy Martin,
commented;
“I am delighted to deliver the Feasibility 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 projects 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 US$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 tonnes per year 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.”
Figure 1: 3D image of the proposed RKEF plant at the Araguaia
Ferronickel Project
(please see image in the full version of the the
announcement at www.horizonteminerals.com)
Analyst conference call and presentation
Horizonte will host an analyst conference call
and presentation today, 29 October 2018, at 10:00 GMT. Participants
can access the call by dialling one of the following numbers below
approximately 10 minutes prior to the start of the call.
UK Toll-Free Number: 08082370030
UK Toll Number: +44 (0)2031394830
PIN: 75301112#
The presentation will be available for download
from the Company’s website www.horizonteminerals.com or by clicking
on the link below:
http://www.anywhereconference.com?UserAudioMode=DATA&Name=&Conference=131699934&PIN=75301112
A recording of the conference call will
subsequently be available on the Company’s website.
Araguaia Feasibility Study Detailed
Information
Section 1 - Project Summary
The wholly owned Araguaia Project is located in
the south-east of the Brazilian state of Pará, approximately 760 km
south of the state capital Belém.
The Project comprises an open pit nickel
laterite mining operation that mines 27.5 million tonnes (‘Mt’)
Mineral Reserve of a 119 Mt Mineral Resource to produce 52,000
tonnes of ferronickel (‘FeNi’) (containing 14,500 tonnes 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 tonnes of dry ore feed
per year. The FeNi product will be transported by road to the port
of Vila do Conde for sale to overseas customers.
The process plant, mining, infrastructure and
utilities engineering has been developed to support capital and
operating cost estimates to the Association for the Advancement of
Cost Engineering (‘AACE’) class 3 standard. This means that capital
and operating costs estimates have a combined accuracy of -
10%+15%. The capital and operating costs are as of Q3 2018.
The results of the FS demonstrate that Araguaia
shows compelling economics as highlighted in Table 1, below.
Table 1: Key Feasibility Study Project Economic
Indicators (post taxation)
Item |
Unit |
Nickel price basis (US$/t
Ni) |
Base(14,000) |
CIBC(16,800) |
WoodMackenzie(26,450) |
Net cash flow |
US$M |
1,572 |
2,582 |
6,060 |
NPV8 |
US$M |
401 |
740 |
1,906 |
IRR |
% |
20.1 |
28.1 |
50.4 |
Breakeven (NPV8) Ni price |
US$/t |
10,766 |
10,766 |
10,766 |
C1 Cost (Brook Hunt) |
US$/t Ni |
8,193 |
8,193 |
8,193 |
Production year payback |
years |
4.2 |
3.3 |
1.8 |
LOM Ni recovered |
kt |
426 |
426 |
426 |
LOM Fe recovered |
kt |
995 |
995 |
995 |
Average Ni production at 0.9 Mt/a
ore3 |
kt/a |
14.5 |
14.5 |
14.5 |
Average Fe production at 0.9 Mt/a
ore |
kt/a |
32 |
32 |
32 |
Total revenue |
US$M |
5,970 |
7,164 |
11,449 |
Total costs |
US$M |
3,811 |
3,995 |
4,657 |
Operating cash flow |
US$M |
2,159 |
3,169 |
6,792 |
Capital intensity – Initial capex/t
nickel |
US$/t Ni |
1,041 |
1,041 |
1,041 |
The model assumes 100% equity, providing scope
for increased returns with the ability to leverage using commercial
or other debt. The base case was developed using a flat nickel
price of US$14,000/t Ni in line with Wood Mackenzie’s (‘WM’) short
term forecast. Two other cases were prepared; one using a market
consensus price of US$16,800/t Ni and the other used WM’s long term
forecast of US$26,450/t Ni. These two additional price forecasts
represent upside scenarios.
As shown in Table 1 (above), for the base case
the project has a 4.2-year payback period with cumulative gross
revenues of US$5,970 million. The economic analysis indicates a
post-tax NPV of US$401 million and an IRR of 20.1% using the base
case forecast of US$14,000/t Ni, this increases to US$1,906 million
and 50.4% when using the long-term price forecast by WM of
US$26,450/t Ni.
Section 2 – Resources
/ Reserves and Mining
Snowden Mining Industry Consultants completed
the mining engineering along with mining capital, operating cost
estimates and resource estimation for the Project. Snowden is a
global mining consulting and training business with leading skills
and technologies in mining engineering, mine optimisation, and
resource estimation.
Mineral Resources
The Project has two principal mining centres;
Araguaia Nickel South (‘ANS’) and Araguaia Nickel North (‘ANN’).
ANS hosts seven deposits: Pequizeiro, Baiao, Pequizeiro West,
Jacutinga, Vila Oito East, Vila Oito West and Vila Oito, while ANN
hosts the Vale do Sonhos deposit.
A number of phases of diamond drilling has been
completed across the Project commencing in 2010. Drilling at ANS
has been undertaken by Horizonte and Teck, with drilling at ANN by
Xstrata/Glencore. The Company has been active on the ANS project
since the initial discovery in 2010, when it successfully completed
the acquisition and integration of the Teck and Xstrata project
areas, it has been the sole project operator since 2015. A total of
75,250 metres (‘m’) of diamond drilling has been completed
across 2,627 holes for the Project.
Mineral Resource estimates for the deposits
under consideration for the FS are shown in Table 2. The Measured
Mineral Resource is estimated at 18 Mt at a grade of 1.44% Ni using
a cut-off grade of 0.90% Ni. The Indicated Mineral Resource is 101
Mt at a grade of 1.25% Ni. This gives a combined Mineral Resource
of 119 Mt at a grade of 1.27% Ni for Measured and Indicated Mineral
Resources at a cut-off grade of 0.90% Ni (inclusive of Mineral
Reserves). A further 13 Mt at a grade of 1.19% Ni (at a cut-off
grade of 0.90% Ni) is defined as an Inferred Mineral Resource.
Table 2: Mineral Resources for ANS and ANN as of February
2017 by material type (0.90% Ni cut-off)
Araguaia |
Category |
Materialtype |
Tonnage(kt) |
Bulkdensity(t/m3) |
ContainedNimetal(kt) |
Ni(%) |
Co(%) |
Fe(%) |
MgO(%) |
SiO2(%) |
Al2O3(%) |
Cr2O3(%) |
Subtotal |
Measured |
Limonite |
1,232 |
1.39 |
15 |
1.20 |
0.15 |
37.43 |
2.00 |
17.15 |
11.07 |
2.98 |
Transition |
6,645 |
1.26 |
116 |
1.75 |
0.07 |
18.89 |
10.20 |
42.06 |
6.59 |
1.29 |
Saprolite |
10,291 |
1.40 |
130 |
1.27 |
0.03 |
12.03 |
24.08 |
41.24 |
3.95 |
0.87 |
Total |
Measured |
All |
18,168 |
1.35 |
261 |
1.44 |
0.05 |
16.26 |
17.51 |
39.91 |
5.40 |
1.17 |
Subtotal |
Indicated |
Limonite |
19,244 |
1.39 |
216 |
1.12 |
0.12 |
36.22 |
2.40 |
20.46 |
9.61 |
2.65 |
Transition |
30,917 |
1.20 |
439 |
1.42 |
0.07 |
21.38 |
11.26 |
38.95 |
5.37 |
1.51 |
Saprolite |
51,008 |
1.31 |
610 |
1.18 |
0.03 |
11.83 |
25.79 |
40.59 |
3.16 |
0.85 |
Total |
Indicated |
All |
101,169 |
1.30 |
1,264 |
1.25 |
0.06 |
19.39 |
16.90 |
36.26 |
5.06 |
1.39 |
Total |
Measured + Indicated |
All |
119,337 |
1.30 |
1,525 |
1.27 |
0.06 |
18.91 |
16.99 |
36.81 |
5.11 |
1.36 |
Subtotal |
Inferred |
Limonite |
2,751 |
1.37 |
30 |
1.08 |
0.10 |
34.92 |
3.04 |
22.84 |
9.23 |
2.50 |
Transition |
4,771 |
1.20 |
62 |
1.30 |
0.07 |
21.23 |
11.04 |
39.09 |
5.62 |
1.40 |
Saprolite |
5,398 |
1.35 |
62 |
1.15 |
0.03 |
11.80 |
24.36 |
41.81 |
3.69 |
0.82 |
Total |
Inferred |
All |
12,920 |
1.30 |
154 |
1.19 |
0.06 |
20.21 |
14.90 |
36.77 |
5.58 |
1.39 |
Notes:1. Mineral Resources are not Mineral
Reserves and do not have demonstrated economic viability. All
figures are rounded to reflect the relative accuracy of the
estimate and have been used to derive subtotals, totals and
weighted averages. Such rounding consequently introduces a small
margin of error. Where these occur, Snowden does not consider them
to be material. 2. Mineral Resources are reported inclusive of
Mineral Reserves. 3. The reporting standard adopted for the
reporting of the Mineral Resource estimate uses the terminology,
definitions and guidelines given in the CIM Standards on Mineral
Resources and Mineral Reserves (May 2014) as required by NI 43-101.
4. Snowden completed a site inspection of the deposit by Mr Andy
Ross FAusIMM, an appropriate "Independent Qualified Person" as such
term is defined in NI 43-101. 5. kt = thousand tonnes (metric).
Mineral Reserves The Mineral
Reserve was estimated by Snowden in accordance with the CIM (2010)
and JORC (2012) guidelines.
All economic Indicated Mineral Resources within
the pit designs were classified as Probable Mineral Reserves and
all Measured Mineral Resources at Pequizeiro (ANS) were classified
as Proven Mineral Reserves (this classification was tested and
supported by the trial mining program completed in this pit in
2017). Measured Mineral Resources at Vale dos Sonhos (ANN) were
classified as Probable Mineral Reserves. A summary is provided in
Table 3. The Mineral Reserve of 27.2 Mt gives mine life
of 28 years based on the annual ore throughput to the RKEF plant of
900,000 t/a.
Table 3: Open Pit Mineral Reserves reported at October
2018
Category |
Ore (Mt) |
Ni (%) |
Fe (%) |
SiO2:MgO |
Al2O3(%) |
Proven |
7.33 |
1.72 |
16.01 |
3.01 |
6.00 |
Probable |
19.96 |
1.68 |
17.57 |
2.36 |
4.56 |
Total |
27.29 |
1.69 |
17.15 |
2.52 |
4.94 |
Notes1.Mt – million dry metric tonnes.2. Cut-off
used was 1.4% Ni.3. Dilution was modelled as part of re-blocking,
ore losses applied are 8%.3. The reporting standard adopted for the
reporting of the Mineral Reserve estimate uses the terminology,
definitions and guidelines given in the CIM Standards on Mineral
Resources and Mineral Reserves (May 2014) as required by NI 43-101.
4. Snowden completed a site inspection on three occasions between
March 2016 and May 2017 by Mr Frank Blanchfield FAusIMM, an
appropriate “Independent Qualified Person” as such term is defined
in NI 43-101.
Mining The deposits will be
mined via conventional open pit truck and shovel techniques using
contractors. No blasting will be necessary. Reverse
circulation (‘RC’) grade control drilling will be completed at a
10 m x 10 m spacing well ahead of mining. This combined
with the use of visual control of the limonite and transition
boundary, face sampling, stockpile sampling and ore feed sampling,
supports a comprehensive mine-to-mill strategy that is designed to
maintain consistent feed to the process plant.
Waste will be stored in external dumps near the
pits. Ore will be transported to stockpile hubs near each deposit.
Sheeting (using ferricrete won from the overburden) will be
required to support trafficability in and around the mine during
the wet season. Depending on plant demand, ore will be hauled from
hub stockpiles or directly from the pits to the run of mine (‘ROM’)
at the RKEF process facility. Stockpiles on the ROM will be sheeted
and classified according to ore type and chemistry for
blending.
The resource model was converted to a mining
model to reflect the mining method and incorporated anticipated
mining dilution and loss. The model was re-blocked to 6.25 m x
6.25 m x 2 m, with a 300 mm “skin” of transition
(directly beneath the limonite boundary) treated as loss.
The pits were optimised to target the
highest-grade material giving a mine life of approximately
28 years. This resulted in a cut-off grade of 1.4% Ni being
applied. The pits were then optimised using Whittle 4X to determine
a shell to use for design.
The annual mining rate peaks at
3.5 Mt/annum between production years two and seven before
dropping down to 3.0 Mt/annum for the remainder of the
Project.
The mine supplies high nickel grades in the
early mine life, reaching 2% in production year 2. The Ni grade is
above 1.8% for the majority of the first 10 years of production and
reduces to average approximately 1.6% Ni for the remaining mine
life.
Section 3 – Processing
The process plant design, along with capital and
operating cost estimates were completed by Ausenco Engineering
Canada Inc (‘Ausenco’). Ausenco is a global diversified
engineering, construction and project management company providing
consulting, project delivery and asset management solutions to the
resources, energy and infrastructure sectors.
The Project will utilise a single RKEF
processing line from ore receipts through to shotting of the FeNi
product, Figure 2.
The RKEF process is proven and used successfully
in over 40 nickel laterite plants around the world and was deemed
appropriate for the Project based on the extensive metallurgical
testwork and the pilot plant campaigns completed on the ore.
The key steps in the RKEF flowsheet are (Figure
2);
- ROM ore, at an average moisture
content of 34%, is first blended to meet metallurgical processing
requirements, then transported to the primary crushing stage. Here
the ore is sized using two stages of crushing to match the
requirements of the subsequent steps. A mineral sizer with a
200 mm gap is used for primary sizing, while a mineral sizer
with a 50 mm gap is used for the final stage;
- The ore is then homogenised,
partially dried and agglomerated to an average moisture content of
18% in a rotary dryer (4.5 m diameter x 40 m long) and
fired with pulverized coal;
- The dried agglomerated ore is then
fed to the rotary kiln with the addition of reductant coal. In the
kiln, the ore is completely dried, calcined to remove
chemically-combined moisture, and the iron and nickel oxides are
partially pre-reduced. Kiln dust is recycled to the process at the
primary crushing stage ahead of the dryer/agglomerator;
- Calcine from the kiln is then
transferred to the electric furnace where further reduction of the
nickel and iron occurs, melting and separation of the metal and
slag occurs at high temperature. Slag is tapped at a temperature of
around 1,575°C, while FeNi metal is tapped at a temperature of
close to 1,500°C;
- After tapping, the melt is
transferred by ladle to the refining stage. The final FeNi product
containing 30% Ni is shotted with water, screened, dried and
stockpiled prior to dispatch to the port on trucks where it either
bagged or loaded bulk into sea containers for shipping to
customers; and,
- The electric furnace slag is
granulated and transferred to the slag repository by truck.
Figure 2: ANP process flow diagram showing the RKEF steps
(please see image in the full version of the the
announcement at www.horizonteminerals.com)
Section 4 – Financial
Evaluation
Capital Cost
The estimate is based on the AACE class 3 with
an accuracy range between -10% and +15% of the final project cost
(excluding contingency) with a base date of October 2018. All
amounts expressed are in US dollars unless otherwise stated.
The capital costs estimate (‘capex’) includes
all the direct and indirect costs, local taxes and duties and
appropriate contingencies for the facilities required to bring the
Project into production, including the process plant, power line,
water pipelines and associated infrastructure as defined by the FS.
The estimate is based on an Engineering Procurement and
Construction Management (‘EPCM’) implementation approach and the
Project contracting strategy.
The total estimated initial (pre-production)
capital cost for the project is US$443.1 million (after tax,
including growth and contingency, excluding escalation). A summary
of the capex is shown in Table 4.
Table 4: Summary of capex
WBS # |
Area |
US$’000 |
1000 |
Mine |
6,003 |
3000 |
Ore Preparation |
38,731 |
4000 |
Pyrometallurgy |
137,518 |
5000 |
Material Supply |
21,413 |
6000 |
Utilities andInfrastructure |
106,918 |
7000 |
Buildings |
9,095 |
8000 |
Indirect Costs |
82,409 |
|
Contingency |
40,989 |
TotalCosts |
|
443,076 |
The direct costs in Table 4 include supply,
shipping and site installation. The total contingency carried in
the capex is US$41.0 million, which combined with the
US$24.3 million growth allowance provides a total provision of
US$65.3 million. This combined sum represents 17.2% of the
total capex (excluding growth and contingency).
Operational costs
The mining and operating cost estimate (‘opex’)
was calculated for an operation producing 14,500 t Ni per
annum and is set out as an annual total and US$/t Ni in Table 5
(below), calculated as an average over the Life of Mine (‘LOM’).
The operating costs cover the mine, process plant, ore preparation,
social and environmental, royalties and general and administrative
overheads. The main contributors of the overall operating costs are
power, coal, labour and mining costs, with additional consumables
and other indirect costs, including G&A.
Table 5: Summary of opex
Description |
Cost/annum (US$) |
US$/t nickel |
Process Plant |
|
|
Directs |
|
|
Power |
$32,114,355 |
$2,410 |
Coal |
$21,591,099 |
$1,620 |
Other directs |
$17,965,039 |
$1,348 |
Labour |
$7,831,286 |
$588 |
Subtotal – Direct
costs |
$79,501,779 |
$5,966 |
Indirects |
$10,285,640 |
$772 |
Mining costs |
$21,112,173 |
$1,584 |
Total costs |
$110,889,592 |
$8,322 |
Summary Economics
The financial model developed assumes 100%
equity. The base case was developed using a flat nickel price of
US$14,000/t Ni. Two other cases were prepared; one using a market
consensus price of US$16,800/t Ni and the other used the WM long
term forecast of US$26,450/t Ni. These two additional price
forecasts represent upside scenarios.
As shown in Table 1, the post taxation model for
the base case at the ANP has a 4.2-year payback period with
cumulative gross revenues of US$5,970 million. The economic
analysis indicates a post-tax NPV of US$401million and an IRR of
20.1% using the base case forecast of US$14,000/t Ni which
increases to US$1,906 million and 50.4% when using the long-term
price forecast by WM of US$26,450/t Ni. Table 6 shows the
pre-taxation results.
Table 6: Project economic performance (pre-taxation)
Item |
Unit |
Nickel price basis (US$/t
Ni) |
Base(14,000) |
CIBC(16,800) |
WoodMackenzie(26,450) |
Net cash flow |
US$M |
1,834 |
3,208 |
7,313 |
NPV8 |
US$M |
456 |
840 |
2,219 |
IRR |
% |
21.2 |
29.9 |
55.3 |
Breakeven (NPV8) Ni price |
US$/t |
10,672 |
10,672 |
10,672 |
C1 Cost (Brook Hunt) |
US$/t Ni |
8,193 |
8,193 |
8,193 |
Production year payback |
years |
4.0 |
3.0 |
0.75 |
Total costs |
US$M |
4,137 |
4,137 |
4,137 |
Operating cash flow |
US$M |
2,421 |
3,616 |
7,901 |
Sensitivity Analysis
The sensitivity analysis demonstrates how the
NPV8 is affected by changes to one variable while holding the other
variables constant. The results of the sensitivity analysis are
presented in Table 7 and Figure 3. The breakeven (‘B/E’) indicates
the change in the variable that will bring the project NPV8 to
US$0.000 if all other variables remain unchanged. For example, if
the grade of Ni reduces by 23.7% the Project will break even on
NPV8.
Table 7: Sensitivity table for the Base Case (US$14,000/t)
NPV8, after taxation
|
-20% |
|
-10% |
|
-5% |
|
0% |
|
5% |
|
10% |
|
20% |
|
B/E4 |
Grade Ni |
65 |
|
234 |
|
317 |
|
401 |
|
483 |
|
566 |
|
731 |
|
-23.7% |
|
Recovery Ni |
65 |
|
234 |
|
317 |
|
401 |
|
483 |
|
566 |
|
731 |
|
-23.7% |
|
Price Ni |
56 |
|
230 |
|
315 |
|
401 |
|
485 |
|
570 |
|
740 |
|
-23.1% |
|
Pre-production capital |
469 |
|
435 |
|
418 |
|
401 |
|
383 |
|
366 |
|
331 |
|
110.2% |
|
Production capital |
403 |
|
402 |
|
401 |
|
401 |
|
400 |
|
399 |
|
397 |
|
- |
|
Mining cost |
436 |
|
418 |
|
409 |
|
401 |
|
391 |
|
383 |
|
365 |
|
222.6% |
|
Processing cost |
531 |
|
466 |
|
433 |
|
401 |
|
367 |
|
335 |
|
269 |
|
59.8% |
|
US$/BRL FX rate |
222 |
|
321 |
|
363 |
|
401 |
|
434 |
|
465 |
|
519 |
|
-35.4% |
|
Electricity price |
447 |
|
424 |
|
412 |
|
401 |
|
389 |
|
377 |
|
353 |
|
167.2% |
|
Discount factor |
524 |
|
458 |
|
428 |
|
401 |
|
374 |
|
349 |
|
304 |
|
151.3% |
|
Overhead cost |
414 |
|
407 |
|
404 |
|
401 |
|
397 |
|
393 |
|
386 |
|
- |
|
Figure 3: Sensitivity to NPV8 for changes in various key
inputs
(please see image in the full version of the the
announcement at www.horizonteminerals.com)
The sensitivity analysis shows that the Project
is more sensitive to nickel price, nickel recovery and grade than
it is to either opex or capex.
Section 5 – Market Review and Nickel
Pricing
A market study was provided by WM, a global
natural resource research and consulting company, with speciality
in the nickel industry. WM’s findings are summarised below.
World nickel demand is forecast to increase by
3.6% in 2018, to 2.26 Mt before slowing to a compound annual
growth rate of 2.1% a year, reaching 2.61 Mt in 2025. Growth
over the long term is slightly stronger, at 2.5% a year, to
3.35 Mt in 2035, due to increasing uptake by the battery
segment (for electric vehicles). Over this period, primary nickel
uptake in stainless will account for 50–70% of total demand, rising
from 1.54 Mt in 2018 to 1.66 Mt in 2025, and 1.77 Mt
in 2035.
Thus, with an outlook for nickel of structural
shortage, deepening deficits and falling stocks, nickel prices are
expected to continue to increase above their recently established
range of US$12,500/t to US$15,000/t (US$5.90 to US$6.80/lb). A near
term forecast for the purposes of the FS is therefore, US$14,000/t
(US$6.35/lb). For comparison, WM’s long-term incentive price
currently stands at about US$26,450/t (US$12.00/lb).
The composition of ANP FeNi30 is comparable to
existing FeNi30 being produced. Consequently, there is no
impediment (based on the elemental breakdown provided) to the
proposed FeNi30 product being acceptable to the stainless steel
market.
World stainless steel production increased by
12 Mt between 2012 and 2017, mostly in China and to a lesser
extent across the rest of Asia. Forecast production in 2018 is
50.8 Mt, up 4.5% on 2017. This upward trend is likely to
continue over the mid-term, before slowing after 2025. As future
growth in stainless production is expected to continue, the demand
for FeNi (including FeNi30) should also increase. Consequently, WM
forecasts long term FeNi production to be 450,000–460,000 a
year, compared with 433,000 in 2018. This suggests there could
be a need for the development of new FeNi projects in the
future.
Section 6 – Community and Environment
The FS sets out key environmental and social
risks and impacts and how the Company plans to minimise, manage and
mitigate them and then monitor performance. This will be primarily
achieved through a system of Environmental Control Plans, to be
implemented before, during and after construction to meet Brazilian
and international standards.
The Company is working with Environmental
Resource Management (‘ERM’), a global leader in this field,
together with local Brazilian groups: Integratio Mediação Social e
Sustentabilidade (social and land) and DBO Environmental
Engineering (fauna) for the FS environmental and social work
streams and the project permitting work for the Construction
Licence (Licença de Instalação (‘LI’). All work has been undertaken
to IFC Performance Standards, 1, 2 and 5 and Brazilian CONAMA
(environmental) legislation.
The groups have conducted a number of new
studies in 2017 and 2018 together with ongoing programs, these
included:
- Environmental Control Plans -
elaboration and detailing of socio-environmental programs;
- Inventories of fauna and
flora;
- Air dispersion modelling;
- Hydrogeological modelling and water
balance;
- Visits by physical, biological and
social analysts to site; and,
- Air, noise and water monitoring –
ongoing as part of base line data build up into the construction
and operational phase.
ANP will generate approximately 500 direct and
indirect jobs in the south-eastern rural area of Pará State, over
the 28 years of operations. The majority of these workers during
the operational phase will reside locally. The peak construction
workforce is expected to reach over 1,000.
Community contributions are expected to total
over US$700 million during the LOM, including:
- Over US$400 million in company
taxes; and,
- Over US$280 million in employee and
contractor wages.
Section 7 – Next Steps
Subject to Horizonte’s Board of Directors’
approvals, completion of project financing, approval of the
Construction Licence (‘LI’) and overall nickel market conditions,
the Company will continue to advance the Project towards
construction, the key development milestones will be spilt into two
phases, with the next six to eight months focussed on Phase 1.
Phase 1
- Completion of any outstanding
metallurgical test work;
- Completion of basic engineering and
move to detailed design engineering;
- Early works site preparation;
and,
- Commence negotiations with EPCM or
EPC providers.
Phase 2
- Completion of detailed design;
- Specification, vendor selection,
and contracts for all mechanical packages; and,
- Completion of EPCM or EPC
activities scheduled to deliver the project based on a 31 month
schedule.
Report Filing
A technical report on this FS, prepared in
accordance with the NI 43-101 reporting requirements, will be filed
on SEDAR at www.sedar.com and at www.horizonteminerals.com within
forty-five (45) days of the date of this news release.
Qualified
Persons
Mr Frank Blanchfield, B.Eng, FAusIMM, Principal
Consultant, Snowden Mining Industry Consultants Pty Ltd;
Mr Andrew Ross, BSc (Hons), MSc, FAusIMM,
Principal Consultant, Snowden Mining Industry Consultants Pty
Ltd;
Mr Francis Roger Billington, BSc (Hons), P.Geo.
(APGO), Consultant;
Dr Nicholas Barcza, BSc (Eng.), MSc (Eng.), PhD,
Pr.Eng. (ECSA), HLFSAIMM, Metallurgical Engineering Consultant;
and;
Mr. David Haughton, B. Sc, MIMM, C Eng, Senior
Process Engineer on behalf of Ausenco Canada Inc,
are the Qualified Persons under NI 43-101, and
have reviewed, approved and verified the technical content of this
press release, related to their area of expertise, and HZM has
verified other technical content.
For further information visit www.horizonteminerals.com or
contact:
Horizonte Minerals
plc |
Jeremy Martin (CEO) |
+44 (0) 203 356 2901 |
|
|
Numis Securities Ltd
(NOMAD & Joint Broker) |
John Prior |
+44 (0) 207 260 1000 |
Paul Gillam |
|
|
|
Shard Capital (Joint
Broker) |
Damon Heath |
+44 (0) 20 186 9952 |
Erik Woolgar |
|
|
|
Tavistock (Financial
PR) |
Emily Fenton |
+44 (0) 207 920 3150 |
Gareth Tredway |
|
About Horizonte Minerals:
Horizonte Minerals plc is an AIM and TSX-listed
nickel development company focused in Brazil. The Company is
developing the Araguaia project, as the next major ferronickel mine
in Brazil, and the Vermelho nickel-cobalt project, with the aim of
being able to supply nickel and cobalt to the EV battery
market. Both projects are 100% owned.
Horizonte shareholders include: Teck Resources
Limited, Canaccord Genuity Group, JP Morgan, Lombard Odier Asset
Management (Europe) Limited, City Financial, Richard Griffiths and
Glencore.
Glossary of technical terms
AACE |
Association for the Advancement of Cost Engineering |
|
|
AACE Class 3 |
+-10% +15% accuracy |
|
|
Agglomerated |
Made into small lumps |
|
|
Al2O3 |
Aluminium Oxide |
|
|
ANN |
Araguaia Nickel North (the Northern deposit) |
|
|
ANS |
Araguaia Nickel South (the Southern deposits) |
|
|
C1 |
C1 cash cost as defined by Brook Hunt |
|
|
Calcine |
Output from the kiln which is ore that is reduced by heating in the
presence of oxygen and coal |
|
|
Capex |
Capital cost |
|
|
Co |
Cobalt |
|
|
Cut-off grade |
Lowest grade of mineralisation material considered economic, used
in the calculation of ore resources |
|
|
Cr2O3 |
Chromium Oxide |
|
|
Dilution |
Waste or low-grade material accidently mined with the ore |
|
|
EPC |
Engineering Procurement and Construction |
|
|
EPCM |
Engineering Procurement and Construction Management |
|
|
EV |
Electric Vehicles |
|
|
Fe |
Iron |
|
|
FeNi30 |
Ferronickel with 30% Nickel and 70% Iron |
|
|
Ferronickel or FeNi |
An alloy that contains approximately 30% nickel and 70% iron and is
the produced by the project as an ingot |
|
|
HZM, Horizonte or the Company |
Horizonte Minerals plc |
|
|
IFC |
International Finance Corporation |
|
|
IRR |
Internal Rate of Return |
|
|
Kt |
Thousand Tonnes (metric) |
|
|
LME |
London Metal Exchange |
|
|
LOM |
Life of mine |
|
|
Loss |
Ore that is unintentionally left behind or mined as waste |
|
|
MgO |
Magnesium Oxide |
|
|
MT |
Million Tonnes (metric) |
|
|
Ni |
Nickel |
|
|
NPV8 |
Net present value at an 8% discount rate |
|
|
Opex |
Operating cost |
|
|
Ore |
A naturally occurring solid material from which a metal or valuable
mineral can be extracted profitably |
|
|
PEA |
Preliminary Economic Assessment |
|
|
Reverse Circulation Drilling |
A rock drilling system that circulates drill cuttings through the
centre of the drill rod so that they can be collected and assayed
without contamination |
|
|
RKEF |
Rotating Kiln Electric Furnace is the process by which nickel
laterite ore is reduced and then melted in so that metal is
separated from the slag to produce ferronickel |
|
|
ROM |
Run of mine stockpile |
|
|
Shotted |
Formation of small pellets from molten material |
|
|
SiO2 |
Silicon Dioxide |
|
|
Tpa |
Tonnes (metric) per annum |
|
|
US$ |
United States Dollar |
|
|
WM |
Wood Mackenzie |
|
|
Mineral Reserves |
Mineral Reserves are sub-divided into 2
categories. The highest level of Reserves or the level with the
most confidence is the `Proven' category and the lower level of
confidence of the Reserves is the `Probable' category. Reserves are
distinguished from resources as all of the technical and economic
parameters have been applied and the estimated grade and tonnage of
the resources should closely approximate the actual results of
mining. The guidelines state "Mineral Reserves are inclusive of the
diluting material that will be mined in conjunction with the
Mineral Reserve and delivered to the treatment plant or equivalent
facility." The guidelines also state that, "The term `Mineral
Reserve' need not necessarily signify that extraction facilities
are in place or operative or that all government approvals have
been received. It does signify that there are reasonable
expectations of such approvals. |
|
|
Proven Mineral Reserves |
A `Proven Mineral Reserve' is the
economically mineable part of a Measured Mineral Resource
demonstrated by at least a Preliminary Feasibility Study. This
study must include adequate information on mining, processing,
metallurgical, economic, and other relevant factors that
demonstrate, at the time of reporting, that economic extraction is
justified. |
|
|
Probable Mineral Reserves |
A `Probable Mineral Reserve' is the
economically mineable part of an Indicated and in some
circumstances a Measured Mineral Resource demonstrated by a least a
Preliminary Feasibility Study. This study must include adequate
information on mining, processing, metallurgical, economic, and
other relevant factors that demonstrate, at the time of reporting,
that economic extraction can be justified. |
|
|
Minerals Resource |
Mineral Resources are sub-divided into 3
categories depending on the geological confidence. The highest
level with the most confidence is the `Measured' category. The next
level of confidence is the `Indicated' category and the lowest
level, or the resource with the least confidence, is the `Inferred'
category. |
|
|
Indicated Mineral Resource |
An `Indicated Mineral Resource' is that part
of a Mineral Resource for which quantity, grade or quality,
densities, shape and physical characteristics, can be estimated
with a level of confidence sufficient to allow the appropriate
application of technical and economic parameters, to support mine
planning and evaluation of the economic viability of the deposit.
The estimate is based on detailed and reliable exploration and
testing information gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill
holes that are spaced closely enough for geological and grade
continuity to be reasonably assumed. |
|
|
Measured Mineral Resource |
A `Measured Mineral Resource' is that part
of a Mineral resource for which quantity, grade or quality,
densities, shape and physical characteristics are so well
established that they can be estimated with confidence sufficient
to allow the appropriate application of technical and economic
parameters, to support production planning and evaluation of the
economic viability of the deposit. The estimate is based on
detailed and reliable exploration, sampling and testing information
gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes that are spaced
closely enough to confirm both geological and grade
continuity. |
|
|
Inferred Mineral Resource |
An `Inferred Mineral Resource' is that part
of a Mineral Resource for which quantity and grade or quality can
be estimated on the basis of geological evidence and limited
sampling and reasonably assumed, but not verified, geological and
grade continuity. The estimate is based on limited information and
sampling, gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes. |
CAUTIONARY STATEMENT REGARDING FORWARD
LOOKING INFORMATION
Except for statements of historical fact
relating to the Company, certain information contained in this
press release constitutes "forward-looking information" under
Canadian securities legislation. Forward-looking information
includes, but is not limited to, the ability of the Company to
complete the Acquisition as described herein, statements with
respect to the potential of the Company's current or future
property mineral projects; the success of exploration and mining
activities; cost and timing of future exploration, production and
development; the estimation of mineral resources and reserves and
the ability of the Company to achieve its goals in respect of
growing its mineral resources; the ability of the Company to
complete the Placing as described herein, and the realization of
mineral resource and reserve estimates. Generally, forward-looking
information can be identified by the use of forward-looking
terminology such as "plans", "expects" or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes",
or variations of such words and phrases or statements that certain
actions, events or results "may", "could", "would", "might" or
"will be taken", "occur" or "be achieved". Forward-looking
information is based on the reasonable assumptions, estimates,
analysis and opinions of management made in light of its experience
and its perception of trends, current conditions and expected
developments, as well as other factors that management believes to
be relevant and reasonable in the circumstances at the date that
such statements are made, and are inherently subject to known and
unknown risks, uncertainties and other factors that may cause the
actual results, level of activity, performance or achievements of
the Company to be materially different from those expressed or
implied by such forward-looking information, including but not
limited to risks related to: the inability of the Company to
complete the Acquisition as described herein, exploration and
mining risks, competition from competitors with greater capital;
the Company's lack of experience with respect to development-stage
mining operations; fluctuations in metal prices; uninsured risks;
environmental and other regulatory requirements; exploration,
mining and other licences; the Company's future payment
obligations; potential disputes with respect to the Company's title
to, and the area of, its mining concessions; the Company's
dependence on its ability to obtain sufficient financing in the
future; the Company's dependence on its relationships with third
parties; the Company's joint ventures; the potential of currency
fluctuations and political or economic instability in
countries in which the Company operates; currency exchange
fluctuations; the Company's ability to manage its growth
effectively; the trading market for the ordinary shares of the
Company; uncertainty with respect to the Company's plans to
continue to develop its operations and new projects; the Company's
dependence on key personnel; possible conflicts of interest of
directors and officers of the Company, the inability of the Company
to complete the Placing on the terms as described herein, and
various risks associated with the legal and regulatory framework
within which the Company operates. Although management of the
Company has attempted to identify important factors that could
cause actual results to differ materially from those contained in
forward-looking information, there may be other factors that cause
results not to be as anticipated, estimated or intended. There can
be no assurance that such statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements.
|
1 NPV calculated using
8% discount rate |
|
2 USD/BRL 1/3.5
exchange rate applied for life-of-mine |
|
3 Average over initial
28 years of processing |
|
4 The breakeven change
for the variable if all other variables remain unchanged. For
example, if the grade of Ni reduces by 23.7% the Project will break
even on NPV8. |
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