TIDMHZM
RNS Number : 1473Q
Horizonte Minerals PLC
17 October 2019
NEWS RELEASE
17 October 2019
VERMELHO PRE-FEASIBILITY STUDY RETURNS NPV OF US$1.7 BILLION AND
CONFIRMS LOW COST, LONG LIFE NICKEL SULPHATE PROJECT
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 Pre-Feasibility Study ('PFS'
or the 'Study') for the 100% owned Vermelho Nickel-Cobalt Project
('Vermelho, or 'the Project') in Brazil's Pará State.
Highlights:
-- The Study confirms Vermelho as a large, high-grade resource,
with a long mine life and low-cost source of nickel sulphate for
the battery industry;
-- The compelling economic and technical results from the study
support further development of the project towards a full
Feasibility Study;
-- A 38-year mine life estimated to generate total cash flows
after taxation of US$7.3billion([1]) ;
-- An estimated Base Case post-tax Net Present Value(1) ('NPV')
of US$1.7 billion([2]) and Internal Rate of Return ('IRR') of
26%;
-- At full production capacity the Project is expected to
produce an average of 25,000 tonnes of nickel and 1,250 tonnes of
cobalt per annum utilising the High-Pressure Acid Leach
process;
-- The base case PFS economics assume a flat nickel price of
US$16,400 per tonne ('/t') for the 38-year mine life;
-- C1 (Brook Hunt) cash cost of US$8,020/t Ni (US$3.64/lb Ni),
defines Vermelho as a low-cost producer;
-- Initial Capital Cost estimate is US$652 million (AACE class
4), including US$97.7 million of contingencies (equating to
approximately 18% of capital); and
-- Vermelho is set to deliver significant socio-economic
benefits for communities in the Pará state, including over 1,800
direct jobs in the construction phase, and over 600 jobs during
operation, as well as additional economic and social development
programs.
Horizonte CEO, Jeremy Martin, commented;
"I am delighted to deliver the Pre-Feasibility Study for the
Vermelho nickel-cobalt project which represents another significant
milestone delivered by the Company this year. The Study now
positions Horizonte as a multi-asset nickel developer with a
combined NPV in excess of US$2.5 billion at current nickel prices
across the Araguaia and Vermelho projects.
The PFS demonstrates that Vermelho can be a significant low-cost
supplier of nickel in the form of battery grade nickel-sulphate.
Over the 38-year mine life using the Base Case nickel price of
$16,400, the operation is expected to generate cash flows after
taxation of US$7.3 billion, an IRR of over 26%, and sits on the
lower half of the global cost curve. If we apply the long-term Wood
Mackenzie nickel price of US$19,800, the project IRR increases to
31% and the NPV to approximately $2.3 billion.
Importantly, the Vermelho project will also produce battery
grade cobalt sulphate, another key component for the electric
vehicle ('EV') battery industry with 60% of global supply currently
sourced from a single country. The consumer driven EV market is
trending towards both sustainability and ethically sourced
materials, including nickel and cobalt, and we see both of the
Company's projects in Brazil as being attractive to end users who
are focused on traceable, ethically sourced materials.
With the PFS now successfully completed, the priority now is to
identify partners, secure funding and advance the project by
undertaking a full feasibility study on Vermelho. We will look to
the replicate the success achieved by the Coral Bay Nickel
Corporation where the company is currently producing around 20,000
tonnes per year of nickel utilising a twin line HPAL plant. This
was a low capex plant which has been operating successfully for the
last 15 years.
With a combined contained nickel inventory of over 4 million
tonnes and the obvious synergies that come with having two
world-class projects within 85 kilometres of each other in a stable
and mining friendly jurisdiction, we have further cemented the
Company as having one of the largest undeveloped nickel portfolios
in the world. With financing discussions underway to commence the
construction of Araguaia and Vermelho demonstrating significant
economic potential, Horizonte is well positioned, owning two
high-quality projects at an advanced stage.
The nickel market fundamentals continue to be positive for the
short to long term, driven by robust demand from stainless steel
growth and anticipated increase in 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 Vermelho."
Analyst conference call and presentation
Horizonte will host an analyst conference call and presentation
today, 17 October 2019, at 11:00 BST. 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: 0800 358 9473
PIN: 91815157#
UK Toll Number: +44 3333 000 804
PIN: 91815157#
The presentation will be available for download from the
Company's
website www.horizonteminerals.com or by clicking on the link
below:
https://www.anywhereconference.com?Conference=301302216&PIN=91815157&UserAudioMode=DATA
A recording of the conference call will subsequently be
available on the Company's website.
Vermelho Pre-Feasibility Study Detailed Information Project
Summary
The Project is located in the north-western Brazilian state of
Pará in the Carajás Mining District, approximately 85 kilometres
('km') north-west of the Company's 100% owned Araguaia North
Project.
The Project comprises a planned 38 year operation with an open
pit nickel laterite mining operation that mines a 141.3 million
tonne (Mt) Probable Mineral Reserve (at a cut-off of 0.7% Ni) to
produce 924,000 tonnes of nickel contained in nickel sulphate,
36,000 tonnes of cobalt contained in cobalt sulphate and a saleable
by-product, kieserite (a form of fertiliser) of which 4.48 Mt are
produced. The project will utilise a hydro-metallurgical process
comprised of a beneficiation plant where ore is upgraded prior to
being fed to a High-Pressure Acid Leach (HPAL) and refining Plant
which produces the sulphates. The plant will be constructed in two
phases, with an initial capacity of 1 Mt per annum (Mt/a) autoclave
feed (Stage 1), then after three years of production, a second
process train (Stage 2 Expansion) will be constructed effectively
doubling the autoclave feed rate to 2 Mt/a. The Stage 1 plant and
project infrastructure will be constructed over a 31-month period.
The nickel and cobalt sulphate products will be transported by road
to the port of Vila do Conde (the same facility planned for
Araguaia) for sale to overseas customers. The kieserite will be
transported to consumers within Pará state.
The engineering has been developed for the process plant,
mining, infrastructure and utilities to support capital ('capex')
and operating expenditure ('opex') estimates to an Association for
the Advancement of Cost Engineering (AACE) class 4 standard. This
means that capex and opex estimates have a combined accuracy of
between -25% and +20% at a confidence level of 50%. The capex and
opex are dated Q2 2019 and are exclusive of future escalation.
The results of the PFS demonstrate that Vermelho shows positive
economics (Table 1, below).
Table 1: Key Feasibility Study Project Economic Indicators (post
taxation)
Item Unit Nickel price basis (US$/t Ni)**
----------------------------------------- ----------
Base Case 16,400 Long Term 19,800
----------------------------------------- ---------- -----------------
Net cash flow US$ M 7,304 9,546
NPV(8) US$ M 1,722 2,373
IRR % 26.3% 31.5%
Breakeven (NPV(8) ) nickel price US$/t 7,483 7,483
C1 cost (Brook Hunt) US$/t Ni 8,029 8,029
C1 cost (Brook Hunt) years 1-10 US$/t Ni 7,286 7,286
Production year payback years 4.2 3.6
LOM nickel recovered kt 924.0 924.0
LOM cobalt recovered kt 46.61 46.61
LOM kieserite produced kt 4,482 4,482
LOM Total revenue US$ M 19,034 22,175
LOM Total costs US$ M 11,729 12,629
Operating cash flow US$ M 8,451 10,693
Capital intensity - initial capex/t Ni US$/t Ni 635 635
----------------------------------------- ---------- ----------------- -----------------
Note: ** US$2,000/t premium for battery sulphate production has
been added to Nickel revenue, US$34,000/t for the cobalt produced
as cobalt sulphate, and a net revenue of US$100/t of the
by-product, kieserite.
The economic model assumes 100% equity, providing the
opportunity for increased returns leveraging commercial or other
debt. The base case was developed using a flat nickel price of
US$16,400/t Ni. An alternate case using the Wood Mackenzie long
term Nickel price of US$19,800/t Ni was also developed
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$19,034
million. The economic analysis indicates a post-tax NPV8 of
US$1,722 million and an IRR of 26.3% using the base case forecast
of US$16,400/t Ni, this increases to US$2,373 million and 31.5%
when using the Wood Mackenzie long term price of US$19,800/t
Ni.
Resources / Reserves and Mining
The Vermelho nickel deposits consist of two hills named V1 and
V2 (after Vermelho 1 and Vermelho 2), aligned on a
northeast-southwest trend, overlying ultramafic bodies. A third
ultramafic body, named V3, also located in the same trend lies on
flat terrain, southwest of V2. The ultramafic bodies have had an
extensive history of tropical weathering, which has produced a
thick profile of nickel-enriched lateritic saprolite at V1 and
V2.
The Vermelho area was explored in various stages by Companhia
Vale do Rio Doce ('Vale') from 1974 to 2004 involving approximately
152,000 m of combined drilling and pitting. The drilling density
was substantially enhanced in 2002 to 2004, with the majority of
the resource upgraded to the Measured category as defined in JORC
(2004) and CIM Definition Standards (2014). Pilot plant
metallurgical studies were conducted in Australia focused on the
HPAL processing method. A PFS was prepared in 2003, and a
Feasibility Study ('FS') was completed in August 2004 by
GRD-Minproc (2005). This study confirmed the positive economics
supporting the outcomes obtained in previous studies and showed
production capacity of 46,000 tonnes per annum (t/a) of metallic
nickel, and 2,500 t/a of metallic cobalt. The project was given
construction approval in 2005 however later that year Vale elected
to place the Project on hold after Vale acquired Canadian nickel
producer Inco.
Mineral Resources
Snowden Mining and Industry Consultants ('Snowden') were
commissioned by Horizonte to produce the Geology and Mineral
Resources sections of the PFS for the Project.
Within the mining licence, at a cut-off grade of 0.7% Ni, a
total of 140.8 Mt at a grade of 1.05% Ni and 0.05% Co is defined as
a Measured Mineral Resource and a total of 5.0 Mt at a grade of
0.99% Ni and 0.06% Co is defined as an Indicated Mineral Resource.
This gives a combined tonnage of 145.7 Mt at a grade of 1.05% Ni
and 0.05% Co for Measured and Indicated Mineral Resources. A
further 3.1 Mt at a grade of 0.96% Ni and 0.04% Co is defined as an
Inferred Mineral Resource at a cut-off grade of 0.7% Ni.
The Mineral Resource is summarised in Table 2.
Table 2 V1 + V2 - combined classified Mineral Resource report
for Vermelho above 0.7% Ni cut-off within the mining licence
Classification Tonnage (Mt) Ni Ni metal (kt) Co Co metal (kt) Fe(2) O(3) MgO(2) SiO(2)
% % % % %
Measured 140.8 1.05 1,477 0.05 74.6 31.1 11.3 41.0
Indicated 5.0 0.99 49 0.06 2.8 26.3 8.6 49.0
----------------------- ------------- ------ -------------- ------ -------------- ----------- ------- -------
Measured + Indicated 145.7 1.05 1,526 0.05 77.3 30.9 11.2 41.3
----------------------- ------------- ------ -------------- ------ -------------- ----------- ------- -------
Inferred 3.1 0.96 29 0.04 1.4 24.0 15.5 42.2
----------------------- ------------- ------ -------------- ------ -------------- ----------- ------- -------
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 calculations
inherently involve a degree of rounding and consequently introduce
a 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. Mineral Resources are reported on 100% basis for all Project areas.
5. 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.
6. kt = thousand tonnes (metric).
Mineral Reserves
Mineral Reserves were prepared for the Project as part of the
PFS, using the CIM Definition Standards (2014).
In accordance with the CIM Definition Standards on Mineral
Resources and Mineral Reserves (as adopted and amended), Mineral
Reserves are classified as either "Probable" or "Proven" Mineral
Reserves and are based on Indicated and Measured Mineral Resources
only in conjunction "estimation of Mineral Resource and Mineral
Reserve best practice guidelines" as provided by the CIM. No
Mineral Reserves have been estimated using Inferred Mineral
Resources.
All economic Measured and Indicated Resources within the pit
designs were classified as Probable Reserves. A summary of the
Mineral Reserves is provided in Table 3
Table 3 Open pit Mineral Reserves reported as of October
2018
Value Probable
---------
Ore (Mt) 141.3
Ni (%) 0.91
Co (%) 0.052
Fe (%) 23.1
Mg (%) 3.81
Al (%) 0.79
----------- ---------
Notes
1. Cut-off varies by resource model block depending on
individual block geochemistry, however, as a guide the cut-off is
approximately 0.5% Ni.
2. A site inspection on was completed four occasions between
March 2017 and September 2019 by Mr Anthony Finch P. Eng. MAusIMM
(CP Min.), an appropriate "independent qualified person" as such
term is defined in NI 43-101.
Mining
Snowden were commissioned by Horizonte to produce the mining
plans of the PFS.
Mining at Vermelho is planned to be undertaken with conventional
open pit truck and excavator mining methods. Blasting will be
necessary for the upper parts of the deposit. Waste overburden will
be stripped on 4 m benches, and ore on 2 m benches for additional
selectivity.
Reverse circulation ('RC') grade control drilling will be
completed at 12.5 m x 12.5 m spacing to define the waste/ore/ore
type boundary ahead of mining.
Waste will be stored in dumps adjacent to the pits. Ore will be
transported to the run of mine ('ROM') stockpile near the
processing plant or the low-grade stockpiles for later
processing
Due to the wet season, mining (including stockpile rehandling)
will be reduced between October and March (as is standard practice
in the region). It was assumed that a fleet of Scania G500 8x4 22
m3 heavy tippers will be used as part of the fleet and coarse
beneficiation rejects will be used as sheeting, to mitigate
trafficability issues.
The mine production schedule targeted a processing rate of 1
Mt/a HPAL feed for the first three years and a doubling in capacity
thereafter to 2 Mt/a. To facilitate this, ROM feed of approximately
2.25 Mt/a to 4.5 Mt/a is required as well as an acid production
capacity of 350 kt/a to 700 kt/a.
The annual mining rate starts at 8 Mt/a and peaks at 12 Mt/a
between production years 5 and 11. Strip ratios for the deposit are
extremely low (0.14 Waste:Ore) consequently waste dumps are
relatively small.
The mine supplies higher grade ore in the early mine life to the
HPAL circuit, reaching up to 2% Ni and 0.1% Co in the first four
production years. The HPAL feed grade (after beneficiation) is
above 1.5% Ni and 0.08% Co for the majority of the first 17 years
of production and decreases over the remaining LOM as feed is
sourced from large lower grade stockpiles that are to be developed
in the early years and are processed in the later years.
Processing
The process plant design, along with capital and operating cost
estimates were completed by Simulus (Engineers) Pty Ltd, Perth
Australia ('Simulus'). Simulus is a specialist in nickel and cobalt
laterite project metallurgical testwork, piloting and process
design.
The process selected for the Project is the production of a
nickel and cobalt sulphate product via HPAL, mixed sulphide
precipitation ('MSP'), pressure oxidation leaching ('POX'), cobalt
solvent extraction ('CoSX') and crystallization. Prior to the HPAL
process, barren free silica is removed from the ore via a
beneficiation process which involves crushing, scrubbing, washing
and separation by screening and hydrocyclones. To avoid
accumulation of magnesium sulphate in the recycled process water, a
portion is sent to the Kieserite (magnesium sulphate monohydrate,
MgSO4--H2O) crystallization area where Kieserite is recovered and
crystallised for potential sale as fertiliser.
The process plant has been designed to process 4.34 Mt/a of ROM
ore at 1.07% Ni. Of this total feed, 2.34 Mt/a is rejected as
coarse, low grade siliceous waste from the beneficiation plant. The
2 Mt/a beneficiated product at 1.85% Ni grade is then fed to the
HPAL processing plant as upgraded feed (1 Mt/a per train). A common
refining circuit treats the MSP produced from each train via POX,
CoSX and crystallization.
The proposed process plant has been designed to recover 94.4%
and 94.9% of the nickel and cobalt from the HPAL feed at an acid
consumption of 347 kg/t. The nickel and cobalt sulphate products
are of high purity suitable for sale directly into the battery
market. The Kieserite by-product is of appropriate quality to be
sold to the local fertiliser market.
Extensive metallurgical testwork and process design was
undertaken on the Project by the former owner, Vale, at scoping,
prefeasibility and feasibility stages, included drilling and
pitting programs totalling 152,000 m, variability batch testwork,
full-scale pilot testwork and detailed engineering studies. A
five-year, exhaustive, metallurgical testwork and pilot plant
program demonstrated that a high degree of mined ore upgradable
using a simple beneficiation processes was possible. The resultant
feed delivered 96% average leach extraction for nickel and cobalt
via HPAL technology.
Additional testwork has been completed by the current Project
owner, HZM, during 2018 and 2019. This testwork on selected samples
from Vermelho validated the potential to produce high-grade
sulphate products using the HPAL process.
The 6,000 plus samples totalling over 160t used for PFS and
Final Feasibility Study (FFS) piloting were large diameter drill
core and were representative (geographically, of depth, ore type
and by lithology). Additionally, 10% of the samples (1 m from every
10 m) was used for variability testing so piloting and variability
were related.
The processing plant consists of the following main process unit
operations:
-- Beneficiation
-- HPAL
-- Slurry neutralization and residue filtration
-- MSP
-- POX
-- Impurity removal
-- CoSX
-- Nickel sulphate crystallization
-- Cobalt sulphate crystallization
-- Acid liquor neutralization
-- Kieserite crystallization
-- Sulphuric acid plant
-- Reagents and utilities.
Financial Evaluation
Capital Cost
The estimate is based on the AACE class 4 standard, with an
estimated accuracy range between -25% and +20% of the final project
cost (excluding contingency).
The largest capital item is the HPAL plant. In order to manage
initial capital, this is constructed in two phases. The first phase
(Stage 1) has a capacity of 1 Mt/a autoclave feed. Stage 2 is
brought online in year 3 of production and effectively doubles the
HPAL feed rate to 2 Mt/a.
The capex estimate 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 PFS. The estimate is based on an
Engineering Procurement and Construction Management ('EPCM')
implementation approach and the is the contracting strategy
expected to be utilised for the Project.
The total estimated initial (pre-production) capex for the
project is US$652.2 million (after tax, including contingency,
excluding growth and escalation). A summary of the capex is shown
in Table 4.
Table 4: Summary of capex
Capital Initial Train Remainder LOM
cost 2 (US$
component (year M)
3)
(US$ (US$ (US$
M) M) M)
Process plant 575.06 446.68 1,022
Mining pre-production 10.78 - 10.78
Tailings and sediment 24.12 - 24.12
Pumping 2.34 - 2.34
Powerline 14.16 - 14.16
Road 2.59 - 2.59
Permitting and land acquisition 23.19 - 23.19
Mining sustaining - - 21.58 21.58
Other sustaining (including
land permitting and land) - - 1.33 1.33
Closure - - 29.37 29.37
---------------------------------- -------- ------- ---------- -------
TOTAL 652.24 446.68 52.28 1,151
---------------------------------- -------- ------- ---------- -------
The costs in Table 4 include all direct and indirect costs
including owner costs, supply, shipping and site installation. The
total contingency carried in the capex is US$97.7 million, this
represents 18% of the initial capex (excluding contingency) and 25%
of the plant direct costs.
Operational costs
The operating costs shown in Table 5 (below) represent the
average over the LOM; actual costs for these vary from year-to-year
depending on the fixed and variable costs as well as sustaining
capital requirement for the given year. The operating costs cover
the mine, process plant, ore preparation, social and environmental,
royalties and general and administrative costs. The main
contributors of the overall operating costs are power, sulphur,
(for acid and power production) labour and mining costs, with
additional consumables and other indirect costs, including
G&A.
Table 5: Summary of opex
Area LOM US$/t US$/t Average
total nickel** ore annual
(US$ (US$
M) M)
Mining 981 1,062 6.94 25.81
Rejects and tails
handling 414 448 2.93 10.89
Processing costs 5,785 6,261 40.93 152.23
Royalties (CFEM) 23 25 0.16 0.60
Royalty (Vale) 66 72 0.47 1.74
G&A and other costs 215 233 1.52 5.67
SHE 24 26 0.17 0.63
TOTAL 7,508 8,126 53.13 197.57
---------------------- ------- ---------- ------- --------
Note: ** US$2,000/t premium for battery sulphate production has
been added to Nickel revenue, US$34,000/t for the cobalt produced
as cobalt sulphate, and a net revenue of US$100/t of the
by-product, kieserite.
Summary Economics
The financial model based on 100% equity. The Base Case was
developed using a flat nickel price of US$16,400/t Ni for LOM. The
second case was prepared; using the Wood Mackenzie long term price
of US$19,800/t Ni.
The revenue breakdown by product is shown in Table 6.
Table 6 LOM Revenue by product
Revenue by product LOM Revenue (US % of total
$M)**
-----------
Ni Sulphate 17,001 89%
Co Sulphate 1,585 8%
Kieserite 448 2%
-------------------- ---------------- -----------
19,034 100%
-------------------- ---------------- -----------
Note: ** A US$2,000/t Ni premium for battery sulphate production
has been added to Nickel revenue, US$34,000/t for the cobalt
produced as cobalt sulphate, and a net revenue of US$100/t of the
by-product, kieserite
As shown in Table 1, the post taxation model for the Base Case
has a 4.6-year payback period with cumulative gross revenues of
US$19,034 million. The economic analysis indicates a post-tax NPV
of US$1,722million and an IRR of 26.3% using the Base Case of
US$16,400/t Ni. These figures increase to US$2,373 million and
31.5% when using the Wood Mackenzie long term price of US$19,800/t
Ni. Table 7 shows the pre-taxation results.
Table 7: Project economic performance (pre-taxation)
Item Unit Nickel price basis
(US$/t Ni)**
----------------------------
Base Case WM Long
(consensus) Term 19,800
16,400
------------------- ------------- ------------- -------------
Net cash flow US$ million 10,379 13,509
NPV(8) US$ million 2,342 3,185
IRR % 28.8% 34.5%
Breakeven (NPV(8)
) Ni price US$/t 6,946 6,946
C1 Cost (Brooke
Hunt) US$/t 8,029 8,029
Production year
payback Years 4.0 3.5
Cash costs US$ million 7,508 7,520
Operating cash
flow US$ million 11,526 14,655
------------------- ------------- ------------- -------------
Note: ** US$2,000/t premium for battery sulphate production has
been added to Nickel revenue, US$34,000/t for the cobalt produced
as cobalt sulphate, and a net revenue of US$100/t of the
by-product, kieserite.
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 8 and Figure 1.
Table 8: Sensitivity table for the Base Case (US$16,400/t)
NPV(8) , after taxation
Sensitivity parameter -30% -20% -10% 0% 10% 20% 30%
Price/Grade/Recovery of Ni 661 1,016 1,369 1,722 2,074 2,427 2,779
Price/Grade/Recovery of Co 1,617 1,652 1,687 1,722 1,757 1,792 1,827
Net revenue from Kieserite 1,693 1,703 1,712 1,722 1,731 1,741 1,751
Pre-Production Capital 1,873 1,823 1,772 1,722 1,671 1,621 1,570
Stage 2 Capital 1,802 1,775 1,749 1,722 1,695 1,668 1,642
Mining Cost 1,799 1,773 1,748 1,722 1,696 1,670 1,645
Fx rate 1,535 1,613 1,674 1,722 1,761 1,794 1,821
Sulphur Price 1,911 1,848 1,785 1,722 1,659 1,596 1,532
Power cost 1,735 1,730 1,726 1,722 1,718 1,713 1,709
Discount rate 2,523 2,217 1,952 1,722 1,521 1,345 1,189
Beneficiation efficacy 1,298 1,439 1,581 1,722 1,863 2,004 2,146
----------------------------- ------- ------- ------- ------- ------- ------- -------
Figure 1: Sensitivity chart
Please see image in the full version of 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
In June 2019, HZM commissioned Wood Mackenzie to develop a
report on the market for nickel sulphate. As consequence of that
report the following assumptions with respect to commodity pricing
were used in the PFS.
-- The consensus nickel price of US$16,400/t (US$7.44/lb) was
used in the Base Case for the PFS along with a US$2,000/t
(US$0.91/lb) nickel sulphate product premium. The nickel sulphate
premium is driven by the battery market (where nickel sulphate is
valued higher than class 1 nickel) and is supported by very strong
growth in the EV car market. The US$2,000/t (US$0.91/lb) sulphate
premium is the average value realised in the market over the last
12 months. The Wood Mackenzie long-term price currently stands at
approximately US$19,800/t (US$8.98/lb); this was used as an
alternative case for the PFS. A fixed price for nickel was applied
over the LOM. The Qualified Person has reviewed the above and
consider that the results support the assumptions in this Technical
Report.
-- The cobalt price assumption of US$34,000/t (US$15.43/lb) used
in this study is significantly below the long-term consensus
bank/broker forecasts which stand at US$55,000/t (US$25/lb).
Kieserite
In July 2019, HZM commissioned a report on the market for
kieserite in Brazil from Dr Fabio Vale (Director Técnico/Technical
Manager) of Adubai Consultoria Agronômica (Adubai).
The study concludes that:
The fertilizer market in Brazil is large. In 2018, 35.6 Mt of
fertilizer was sold, of this 77.5% was imported and 22.5% was
manufactured locally. The most likely consumers of the kieserite
produced at the Project are the palm oil growers in Pará state, as
palm oil trees have a very high demand for both magnesium and
sulphur, although it has been demonstrated that coffee and cotton
would also benefit from kieserite. The location of the Vermelho
plant in the centre of the Pará state gives its distribution a
competitive advantage over the imported product. The Project will
produce approximately 150,000 t of kieserite a year, which is 10
times the current market for imported kieserite. This means there
would be oversupply which would be expected to dictate a lower
realised price then the current market, and substitution of other
agro-products would be required for all Project kieserite to be
consumed in the local market. This suggest that it would be
unlikely for current prices (approximately US$380/t FOB Barcarena)
to be realised. For the study, HZM has assumed a kieserite price of
US$180/t (delivered) - about half of the current price in
Barcarena. The study assumes a cost of US$80/t for delivery and
marketing of Keiserite.
Community, Environment and Permitting
The Project is located 3km from the town of Canaã dos Carajás,
founded in 1994, which forms the southern limit of the Carajás
Mining District (CMD) Pará state, north of Brazil. The CMD is host
to a number of tier 1 iron, nickel and copper mines operated by
Vale.
Mining and related industries in the CMD play a vital role in
the socio-economic fabric of the region, with the municipality
presenting considerable per capita income, the second highest of
the Pará state.
In 2004, Vale started to operate the Sossego Copper Mine after
several infrastructure municipality improvements, and most recently
(2017) ramped-up the S11D project, one of the largest standalone
iron operations in the world. As a result of the advances of mining
in the region, there has been a significant influx of people and
investment, which has in turn promoted changes and improvements in
the areas of economic growth, cultural diversity and a more
developed economy than nearby towns, heavily centred around mining
related activities.
Key environmental studies for the advancement of project
licensing stages were completed by Vale. HZM will utilize the
studies and baseline data collected by previous owners to inform
and expedite new EIA RIMA studies.
The following mining and environmental permits were granted to
Vale by the end of 2016:
-- EIA/RIMA studies (Environmental Impact Study ('EIS') and
Environmental Impact Report ('EIR')) issued
-- Award of Preliminary Licence ('LP')
-- Environmental Controls Plan issued
-- Application for Installation Licence ('LI')
-- Final Exploration Report approved
-- Mine Plan (Plano de Aproveitamento Economico - PAE) approved
Whilst a new permit pathway is proposed, the previously awarded
permits for Vermelho provide a solid basis from which to progress
the project permitting
HZM will utilize the Vale studies and baseline data collected to
inform and expedite new EIA RIMA studies. As HZM will recommence
the licensing for Vermelho, the Company will both update studies
and undertake new studies to accurately characterize the current
physical environment, biological environment and social
settings.
Next Steps
The PFS demonstrates that the Project is technically,
economically viable, and is expected to obtain all the regulatory
and permitting requirements. Consequently, the Project should
progress to a Feasibility Stage.
Report Filing
A technical report on this PFS, 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 Anthony Finch, P Eng. (APEGBC), B.Eng, B Econ, MAusIMM (CP
Mining), Independent Consultant;
Mr Andrew Ross, BSc (Hons), MSc, FAusIMM, Principal Consultant,
Snowden Mining Industry Consultants Pty Ltd;
Simon Walsh, BSc (Extractive Metallurgy and Chemistry), MBA,
MAusIMM (CP), GAICD, Principal Metallurgist, Simulus (Engineers
& Laboratories) Pty ltd;
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.
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
Paul Gillam +44 (0) 207 260 1000
Shard Capital (Joint
Broker)
Damon Heath Erik Woolgar +44 (0) 20 186 9952
Tavistock (Financial
PR)
Gareth Tredway
Annabel de Morgan +44 (0) 207 920 3150
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 4 +-20% +25% accuracy
C1 C1 cash cost as defined by Brook Hunt
Capex Capital cost
Co Cobalt
Cut-off grade Lowest grade of mineralisation material considered
economic, used in the calculation of ore resources
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 Horizonte Minerals plc
the Company
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 A rock drilling system that circulates drill
Drilling 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 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
Mineral 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.
A `Proven Mineral Reserve' is the economically
mineable part of a Measured Mineral Resource
Proven Mineral Reserves 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.
A `Probable Mineral Reserve' is the economically
mineable part of an Indicated and in some circumstances
Probable Mineral a Measured Mineral Resource demonstrated by
Reserves 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.
Mineral Resources are sub-divided into 3 categories
depending on the geological confidence. The
Mineral Resources 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.
An `Indicated Mineral Resource' is that part
of a Mineral Resource for which quantity, grade
or quality, densities, shape and physical characteristics,
Indicated Mineral can be estimated with a level of confidence sufficient
Resource 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.
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
Measured Mineral with confidence sufficient to allow the appropriate
Resource 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.
An `Inferred Mineral Resource' is that part of
a Mineral Resource for which quantity and grade
Inferred Mineral or quality can be estimated on the basis of geological
Resource 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, 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 obtain the required capital to construct and
operated the Company's projects 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:
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 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]USD/BRL 1/3.8 exchange rate applied for life-of-mine
[2] NPV calculated using 8% discount rate
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDGGGMUUUPBGMQ
(END) Dow Jones Newswires
October 17, 2019 02:00 ET (06:00 GMT)
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