Horizonte Minerals is exploring options for the Araguaia Nickel Project in Brazil, including a potential sale, following failure to secure necessary financing to complete the project.
The alternatives being weighed include securing financing at the subsidiary level, a project sale while in care and maintenance, the liquidation of the project’s assets, or other options available under Brazilian laws.
However, Horizonte said that these measures are unlikely to benefit shareholders.
Since November 2023, Horizonte's new management team has worked to stabilise the company and conducted a comprehensive audit of the project.
The audit confirmed Araguaia as a low-cost operation but revealed a significant increase in completion costs.
More than 150 parties were engaged, and 39 signed non-disclosure agreements to explore debt and equity options, but the financing could not be secured.
The majority of the investors, after conducting due diligence, declined to invest, citing the current challenging nickel market environment.
Factors such as a supply surplus from Indonesia and risks to global nickel demand influenced their decisions, despite the positive long-term outlook for nickel.
As of 10 April 2024, Horizonte reported a cash balance of $16.2m (£13m), excluding funds allocated for the development of the Vermelho Project.
Horizonte interim CEO Karim Nasr said: “The Board and management are extremely disappointed by the results of our effort to attract financing into the company.
“While we received commendation on the quality of the project and of the comprehensive work put together by the company's team, and supportive attitude of the company's creditors and Cornerstone Shareholders, the lack of prospects in a recovery of the Ferro-Nickel market considering Indonesian supply dynamics have impeded the confidence of investors in earlier stage projects with high capital intensity, including Horizonte.”
Earlier this year, Horizonte disclosed a 87% increase in the estimated capital required to complete the Araguaia Nickel Project.
The revised capex for the Araguaia project stands at $1bn, up from the previous budget of $537m.
