Araguaia, one of the largest undeveloped ferro-nickel projects in the world, could produce about 52,000 tonnes of ferronickel a year over a mine life of 28 years, Horizonte Minerals (TSX: HZM; LON: HZM) says.
A feasibility study of the open-pit nickel laterite mining project, in northern Brazil’s Para state, estimates life-of-mine cash flows, after tax, of US$1.6 billion, using a base case nickel price of US$14,000 per tonne (US$6.35 per lb.).
But the post-tax net present value estimate of US$401 million in the study falls below the US$443 million forecast for pre-production capex, while the post-tax internal rate of return of 20.1% is below the 26.4% forecast in a March 2016 prefeasibility study.
The current study released today estimates pre-production costs, which included US$65.3 million of contingencies, could be paid back in just over four years.
Cash costs are expected to come in at US$8,193 per tonne nickel, or US$3.72 per lb.
Araguaia, one of the largest undeveloped saprolite resources in the world, would produce a ferronickel product for the stainless steel market and the company says the project stands to benefit from a “robust” nickel market outlook, with “demand growing at around 5% over the next three to five years from both the traditional stainless-steel sector as well as new demand from growth in the electric vehicle battery market.”
Horizonte has already obtained a preliminary environmental licence and water permit for full-scale operations and says it’s on track to get its construction licence in the first quarter of next year.
The project is made up of two mining areas: Araguaia Nickel South and Araguaia Nickel North. The southern part hosts seven deposits, Pequizeriro, Baiao, Pequizeiro West, Jacutinga, Vila Oito East, Vila Oito West and Vila Oito, while the northern section hosts the Vale do Sonhos deposit.
The deposits will be mined with conventional open-pit truck and shovel techniques using contractors and no blasting is necessary. The project will use a rotary kiln electric furnace plant.
The annual mining rate peaks at 3.5 million tonnes a year between years two and seven before dropping down to 3.0 million tonnes a year for the remaining life of mine.
The nickel grade is above 1.8% for the majority of the first ten years of production and then drops to an average of 1.6%.
The company expects to focus on financing the project in the first and second quarters of 2019, with construction starting in mid-2019, and first production and ramp-up beginning in the fourth quarter of 2021.
A total of 75,250 metres of diamond drilling has been completed on the project across 2,627 holes. Currently, Araguaia has measured and indicated resources of 119.34 million tonnes grading 1.27% nickel and inferred resources of 12.92 million tonnes grading 1.19% nickel, at a cutoff grade of 0.90% nickel.
Horizonte forecasts the mining project would generate about 500 direct and indirect jobs.
In addition to Araguaia, Horizonte Minerals owns the Vermelho project, about 85 km away. The company describes Vermelho as one of the largest, highest-grade, undeveloped laterite nickel-cobalt resources globally.
Based on a corporate presentation this month, key shareholders include Teck Resources (TSX: TECK.B) at 14.7%; Canaccord Genuity Group (TSX: CF), 9.9%; JP Morgan, 8.2%; City Financial, 7.6%; Lombard Odier, 7.5%; Richard Griffiths, 6.7%; and Glencore (LON: GLEN), 5.2%.
At press time in Toronto, Horizonte’s shares were trading at 5.5¢ apiece within a 52-week range of 5.5¢ and 11¢.