- CEO putting a brave face on the delay
- Company working with financial institutions and backers for solution
- Says Araguaia project still expected to deliver strong margins
Shares in nickel miner Horizonte Minerals (HZM:AIM) sank almost 60% on Monday after revealing its 100%-owned Araguaia Nickel Project in Brazil needs 35% more capital expenditure than originally planned and a delay in first production to the third quarter of 2024.
The steep fall in the shares takes them back to where they traded in 2019.
The company said it is working with financial institutions and cornerstone investors to agree a financing solution to complete construction of the project.
On 3 August 2023 the company said 65% of the construction of the Araguaia project has been completed with first commercial production ‘on schedule’ for the first quarter of 2024.
WHAT DID THE COMPANY SAY?
Putting a brave face on the delay, CEO Jeremy Martin commented: ‘Despite the anticipated higher capital requirement, Araguaia remains a Tier 1 asset that will deliver strong margins over its 28-year mine life once production commences next year.
‘Moreover, the imminent completion of the Feasibility Study on Line 2 will demonstrate Araguaia's capacity to support an annual production of 29,000 tonnes per annum.’
Explaining the factors driving the cost increase the company said final detailed engineering work has added ‘additional scope items linked to the major equipment packages, made several enhanced design changes from the original engineering study, and has identified the requirement for additional civil works and quantities.’
On top of that further cost increases have come after changing selected suppliers who have not been able to deliver to the project’s timeframe.
The company has initiated an independent review of the remaining capital expenditure and schedule and expects to provide an update to investors in the middle of the current quarter.
Today’s disappointing project update is an ‘egg-on-face’ moment for Canaccord Genuity which initiated coverage of Horizonte Minerals with a speculative buy on 25 September.
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