Horizonte Minerals fails to secure financing, considering mine sale

Shares of Glencore-backed Horizonte Minerals (AIM, TSX: HZM) plunged on Monday after the company announced it has failed to secure additional financing needed to complete the construction of its Araguaia nickel project in Brazil.

The company stated in a press release that it is now exploring options such as a sale, liquidation or raising financing at the subsidiary level, following an 87% increase in the estimated cost to build the mine to more than $1 billion.

“Horizonte Minerals does not believe that any of these options are likely to recover any value for the company’s shareholders,” the company said in a statement.

Shares of Horizonte Minerals plummeted by 89% by 10:10 p.m. EDT. The UK-based nickel developer now has a market capitalization of $8 million, compared to $241 million last October.

The company began construction of the mine in May 2022, with the aim of producing up to 29,000 tonnes of nickel a year for the stainless steel market.

As of April 10, 2024, Horizonte Minerals had a cash balance of $16.2 million, excluding cash segregated for the development of the Vermelho nickel-cobalt project.

“Despite the strong long-term outlook for nickel, investor sentiment has been dampened by low spot prices and near-term uncertainties, including the supply surplus from Indonesia,” Horizonte said.

As reported by the Financial Times, Jim Lennon, a veteran nickel market analyst at Macquarie, said at a recent seminar that he could see less than 100,000 tonnes of nickel from new projects outside of Indonesia entering the market in the next three to four years.

This compares with 3.5 million tonnes of annual supply expected this year, according to Macquarie.