An assessment of HZM by MI 1/21 Sep 2023 09:03
Horizonte Minerals (LSE:HZM) – which is my other miner on its way to production with, hopefully, the end of the tunnel for shareholders – has flagged the problem. (Although I also have in mind Greatland Gold’s 30% share in Newmont’s Havieron gold mine now building its mine access, where I fear investors are in for a shock when the updated feasibility study is published (late) early next year. There are many others).
To recap why I follow HZM. It is one of this decade’s few stand-alone miners (ie directly accessible to investors, unlike many developing mines hidden inside big groups) progressing to be a major supplier of one of the most in-demand metals – nickel. Once in production it promises to be highly profitable and, after many shocks for them, profitable for shareholders.
But when?
Appearing to be successfully on track to first production early next year at the first stage of its Araguaia Brazilian nickel project in a presentation only two weeks before, HXM shocked on Aug 17 by warning of a risk that cost increases in the remaining part of its $532m construction budget (62% spent so far) “linked to several of the major construction packages including labour, materials and productivity, could result in future drawdowns on the senior debt facility not being permitted and require the Group to pursue alternative sources of funding to meet its commitments.”
But it also said “The Group has cash reserves and access to liquidity which are considered sufficient by the Directors to fund the Group’s committed expenditure both operationally and on its exploration project for the foreseeable future”.
I don’t know what that means. Was the warning just prudence?
Having navigated through numbers of shocks – I and all others had probably thought the end of HZM shareholders’ pain was in sight. But I did point out in Nov 2021 the sheer complexity of the funding package that had been agreed, and urged caution until, a year later in December 2022 I asked “Are we there yet” and then, last February said “Although I suggested the share chart was saying not to chase, their surge from 90p to 140p at the New Year, occasioned by the prospect of production starting later in2023, is showing signs of breaking out up to over 150p” But I went on to say .”Although HZM looks cheap on that production prospect, sooner or later the market will worry about the large share dilution coming along as warrants, options, and streaming revenues, raised to get production going, start to be paid. But no doubt investors will ignore that for some time yet.”
They did, pushing the shares above 160p after a US institution bought 5% only a few weeks ago.
But that was before the latest warning, and now we are back in no-man’s land, with many investors buying in advance of the August half-year update probably hopping mad. Not that many more than normal appear to be selling, even though the nickel price has come back (along with eve
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