Horizonte Minerals, Target 50.8p24 May 2013 10:29
Horizonte Minerals metallurgical work returns "excellent" results; next stop PFS
Horizonte Mining (LON:HZM, CVE:HZM) said the completed metallurgical test programme for its Araguaia nickel project in northern Brazil has returned “excellent results”.
It reveals the Araguaia’s ore is suitable for treatment in a rotary kiln electric furnace, established technology with a 60-year track record.
What comes out the other end of the furnace is a ferronickel grading 15-17%, which meets the requirements of the world’s stainless steel plants.
The data will now be fed into a pre-feasibility study to be carried out in the second half of the year.
Chief executive Jeremy Martin said: "Our metallurgical test programme at Araguaia has returned excellent results and its completion is a major de-risking milestone for the company.
“This work confirms the decision to proceed with the pre-feasibility study based on conventional rotary kiln electric furnace, processing through the application of the tried and tested technology, currently used across some 19 plants around the world for nickel production.
"There are a number of nickel projects out there today that, due to the chemical composition of the deposit or isolated locations with limited access to power, are not amenable to the rotary kiln electric furnace or other proven processes, and as such have to look at new technologies many of which are not commercially proven.
“This is the major difference between Araguaia and many of its peer group.
"The next step is to award the PFS contract, for which we are in the final stages and commence the study with a view to completion in 2014."
Broker finnCap maintained its price target at 50.8p on Horizonte shares after the news today. Importantly, it added, the RKEF technology is well proven, with 19 plants currently in operation worldwide producing ferronickel with three in the near vicinity of Araguaia.
The ferronickel process is not the cheapest and finnCap says an issue facing investors is the estimated US$1.38bn capital cost estimated in last year’s scoping study.
The broker adds that while at first glance this would seem to be beyond the financial capacity of Horizonte, it ignores the fact that Canadian mining group Teck Resources has a 41.8% stake in the company.
Teck currently has a market capitalisation of US$15.9bn and with mining operations across the world is well capable of financing, constructing and operating Araguaia, according to finnCap.
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