Horizonte Minerals: Big Nickel... Big Gold!!

It was back in December 2009 we wrote our initial Value Proposition for Horizonte Minerals (LON:HZM) (view here). That was nearly eight months ago and it would be no exaggeration to say that a lot has happened since then!

If you recall back then, we empathised with CEO Jeremy Martin; questioning what he would need to do to encourage the market to look more positively on the potential of the assets the company had acquired and developed. But when value isn’t reflected in market cap, from a Private Investor’s perspective, therein lies the opportunity. 

In terms of the ‘goings' on’ at Horizonte, a lot has been happening since December and the material developments have now driven us back to the desk to comprehensively update our Value Proposition. In the meantime, specific developments in the Nickel portion of the business, deserve a few thoughts right now.

The outspoken Henry Ford, once said:

“I don't know much about history, and I wouldn't give a nickel for all the history in the world. History is more or less bunk. It is tradition. We want to live in the present, and the only history that is worth a tinker's damn is the history we make”

Well said that man, and certainly, along with the spurious reference to Nickel, it is certainly true that with Horizonte Minerals, investors are better looking forward to where the company is going, rather than back at where it has been.  And right now, the direction looks like Big Nickel and Big Gold.

In their announcement on 27^th July 2010 the Company provided details of the acquisition, in a reverse takeover, of Teck Cominco Brasil S.A.. 

Cutting a long story short, this meant old tiddler Horizonte was, through an agreement with Canadian miner, Teck Resources ‘Teck’ (NYSE:TCK) (TSX:TCK.A), purchasing Teck’s Araguaia nickel project located in the Carajas district of northern Brazil.  The acquisition is to be achieved through the issue of Horizonte shares to Teck, meaning Teck will hold approximately 123 million shares (or over 50% of total equity ) in Horizonte Minerals.

Alongside the Teck acquisition, Horizonte is also to acquire the remaining 50% of the Lontra Lateritic Nickel project from the current owner in exchange for 10million shares in Horizonte. 

Lontra has been shaping up to be a significant good quality lateritic nickel resource in its own right, so taking 100% control will give Horizonte the operational flexibility it needs. 

More importantly - and this is the Big Nickel theory - both the Araguaia and Lontra acquisitions combined mean Horizonte has achieved significant consolidation in the Brazilian Nickel environment and all of this has been realised within the Horizonte wrapper. 

For those of us concerned about large shareholders’ stoicism in these challenging times, Horizonte has secured a lock-in so that shares issued to purchase both Lontra and Araguaia cannot be sold by the vendors for 12 months. 

Of course, owning the assets is one thing, but developing them, with all the challenges this presents is another matter. Taking care of the financials, a dedicated fund raising exercise has been wrapped up in this deal.  In total Horizonte Minerals have raised some £5.13million at ten pence per share, to fund a fast-tracked development of the combined nickel assets; the share price on placement being at a premium to the market price at the time of suspension, pending the reverse takeover announcement.

So, in summary, the company has been able to wrap together a clutch of major nickel assets, serious partners including Teck Resources and the cash necessary to drive the nickel business forward. 

There is one other thing we ought to mention.  Announced at the same time as the reverse takeover, the Company also signed a Memorandum of Understanding withAnglo Pacific Group Plc, (already a substantial shareholder in Horizonte) in relation to a 1.5% net smelter royalty option worth a potential $12,5 million on production at Araguaia. The option itself will cost Anglo Pacific $500k and although the MOU is non-binding at this stage, the deal is expected to conclude within 120 days of the announcement or on completion of a positive pre-feasibility study if sooner.  Full details are contained within the body of the announcement. 

So where to now.....???  Well Big Nickel seems to be underway and within our updated Value Proposition we will look at the future Nickel potential in further detail. 

But alongside Nickel we shouldn’t forget the Gold story, with Horizonte having a clutch of JV partners, the largest of which being Anglogold Ashanti.  It looks like Mr Martin’s plans may well be starting to come together .....

Watch this space!

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