REG - Horizonte Minerals - Q3 2023 Construction Update

Horizonte MineralsAnnouncement

23/10/2023 07:15

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RNS Number : 8804Q  Horizonte Minerals PLC  23 October 2023

NEWS
RELEASE

23 October 2023

 

HORIZONTE MINERALS PROVIDES Q3-2023 CONSTRUCTION UPDATE

HIGHLIGHTS

·   Construction progress continues to be made at Araguaia

o  Strong safety performance, no lost time injuries with close to 5.1 million
hours worked

o  Rotary Kiln sections have been installed on the support piers

o  The furnace shell is complete with roof installation underway

o All critical equipment packages have been contracted and are either on site
or en route to site

o  As of 30 September, 138,000 tonnes of ore averaging 1.92% Ni has been
stockpiled

o  Commissioning of the 126 km (230kV) power transmission line underway

·   US$429 million has been spent at Araguaia as of 30 September 2023

·   As stated on 2 October 2023, Reta Engenharia has been retained to
complete a detailed capital cost and schedule analysis which is expected to be
completed by mid Q4-2023

·   The Company is continuing to progress construction activities while
advancing financing discussions with its cornerstone shareholders and lenders

·   Araguaia Nickel Project Line 2 Feasibility Study ("FS"), which aims to
double nickel production from 14,500 tonnes per annum to 29,000 tonnes per
annum, to be published in mid Q4-2023

Horizonte Minerals Plc (AIM/TSX: HZM) ("Horizonte" or the "Company"), the
nickel company developing two Tier 1 assets in Brazil, reports that
construction activities continue to progress well at its Araguaia Nickel
Project ("Araguaia" or "the Project"). As of 30 September 2023, US$429 million
has been spent on Araguaia with progress made across key work fronts and no
interruptions to date on construction activities.

 

As stated in the press release dated 2 October 2023, a number of factors
arising from the completion of the detailed engineering work has led to an
increase in material and quantities, scope changes, increased costs around the
main electromechanical erection contract and increased duration on delivery
schedule. These changes require additional financing resulting in an expected
increase in the overall Project capital requirement by at least 35% (from the
current capex budget of US$537m) and delay of first production to Q3-2024.
Reta Engenharia is expected to complete its capital cost and schedule analysis
report, following which an independent technical advisor, nominated by Senior
Lenders will review the updated costs with targeted completion by mid Q4-2023.

 

Jeremy Martin, CEO of Horizonte, commented: "Despite the current challenges, I
am pleased to report that construction activities at the Araguaia Project
continue to progress well, with a strong safety performance to date.

 

"Notwithstanding the expected increase in capital, the Araguaia project
remains a Tier 1 nickel project with lower quartile C1 cash costs, and a long
mine life of 28 years producing a high grade, low impurity FeNi product.
Discussions with the Company's major shareholders and lenders to fund the
project to completion are progressing."

 

CAPITAL COST REVIEW PROCESS

 

Reta Engenharia's detailed capital cost and schedule analysis is on-going,
with the updated estimate being assessed to meet the requirements of AACEI
Class 1, improved from the estimate utilised in September 2022.

 

Principal capital changes are linked to the following:

·    Civil works: the development of engineering maturity and
identification of new scopes to the project resulted in increases in civil
quantities (concrete, rebar and formwork) and the corresponding rise in the
installation costs. These changes relate to the water storage reservoir, the
water abstraction pipeline, selected major equipment packages and equipment
interfaces.

·    Electromechanical (EM) assembly: increased equipment and materials
quantities have resulted from the completion of the critical detailed
engineering, and the shift of more EM activities into the wet season given the
expected delay to 3Q-2024. This represents a significant percentage of the
cost increase given the lower productivity in the wet season and increased
quantities.

·    Refractory: the cost to install 4.3 kt of refractory was
significantly underestimated.

·    Vendor delays: one of the vendors have not been able to deliver key
packages in line with the project timeline leading to termination of the
contract and the sourcing of alternatives at higher prices.

·    Schedule extension: given the above and the expected schedule delay
of around six months, there is an associated increase in costs and working
capital linked to the increased schedule duration.

More detailed information will be given once the final engineering study is
complete by mid Q4-2023.

 

PROJECT FINANCING ACTIVITIES

 

As of 30 September 2023, a total of US$429 million has been spent on
construction at Araguaia.

 

As of 30 September 2023, US$215 million has been drawn down from the senior
secured project finance debt facility of US$346 million (the "Senior Debt
Facility"). As of 30 September 2023, the Company had total liquidity sources
of US$253 million comprised of US$131 million undrawn on the Senior Debt
Facility and a Group cash position of US$122 million. Of the Group cash
position, US$93m relates to the project to cover current construction activity
and working capital which includes the full draw down on the Cost Overrun
Facility of US$25m as well as US$5m cost over run equity. The cash balance is
committed to near term capital expenditures. US$16m of the Group cash position
is segregated for the development of Vermelho with the balance of US$13m
spread amongst other entities for the ongoing running of the Group.

 

The remainder of the undrawn Senior Debt Facility of US$131 million is
intended to be used to fund current project capital costs, and in order to
draw down on the Senior Debt Facility, all conditions precedents must be
satisfied including a cost to complete analysis. With the estimated increase
in overall Project capital, the Company is working closely with its senior
lenders and its cornerstone shareholders on a financing solution to solve the
funding gap. The Company's objective is to put in place a financing solution
which will satisfy the cost to complete requirements and thereby allow the
Company to continue to access its Senior Debt Facility.

 

The senior lenders and the independent technical engineers were on-site on 4
October 2023 undertaking a review of construction progress to date.

 

Management discusses the Araguaia Water Storage Reservoir with Senior Lenders
and the independent technical engineers.

 

 

ARAGUAIA NICKEL PROJECT STATUS UPDATE

 

Health, Safety & Wellbeing

 

The lost-time injury frequency rate ("LTIFR") for Araguaia as of 30 September
2023 was 0.00 and the total recordable injury frequency rate ("TRIFR") was
0.70 per million hours worked, comparing favourably to a TRIFR of 2.1 for the
same period last year. As of 30 September 2023, more than five million hours
of work had occurred directly on the Araguaia construction project, without a
lost time injury.

 

Horizonte continues to focus its safety programmes on critical risk controls,
safe behaviours and risk management. During the Project's life to date, over
7,600 internal safety audits have been conducted and more than 11,000 safety
plan observations have been completed. To increase engagement and
participation by our contracting partners in our safety systems and processes,
we continue to monitor and report on individual partner company performance on
a range of indicators and undertake interventions as necessary to ensure zero
harm.

 

Construction activities

 

 

An overview of the Araguaia Nickel process plant site.

 

The ore homogenisation building has all the structural steelwork in place with
the cladding of the roof underway. The framework for the overhead tripper
conveyor that runs the full length of the shed has been installed and once
commissioned, will feed crushed ore onto the two blended stockpiles. Each
stockpile will be 90m long, 30m wide and around 13m in height, with a combined
capacity of 36,000 wet tonnes of ore. Completion of the mechanical
construction of the homogenisation building is planned for early February 2024
when commissioning is expected to begin. Ahead of this, the belt conveyor,
cables and piping will be installed.

 

All the structural steelwork is in place on the ore homogenisation building,
with the cladding of the roof underway.

 

The 42m long Rotary Dryer has been lifted onto its support piers for final
alignment and completion ahead of internal and external welding. Commissioning
of the Rotary Dryer mechanical assembly is scheduled to begin by year end.
Steelwork is currently being erected and will support auxiliary equipment
including the electrostatic precipitator, dry ore feed bins, dry ore discharge
and tertiary crusher. Other key parts currently being erected include the gear
assembly, installation of the driver and lubrication system.

 

The Rotary Dryer (foreground) is scheduled for commissioning by year end.

 

All eleven sections of the FLSmidth Rotary Kiln have now been lifted onto the
support piers and the bearing guide rings have been installed, ahead of final
alignment and welding. Measuring 110m long and 5.5m wide, the Rotary Kiln will
produce calcine that is transferred to the Electric Arc Furnace at a rate of
around 115 dry tonnes per hour at an exit temperature of around 800(o)C.
Equipment that is due to be installed over the next two months includes the
gear assembly, the shell driver and lubrication system. Preparation for the
refractory lining and the installation will commence in December 2023.

 

The Rotary Kiln installed on the support piers with main roller bearing guide
rings visible.

 

The Electric Arc Furnace shell is complete, and the roof sections are on site
with erection underway. The electrical transformer has been positioned within
the furnace building and the nine calcine feed bins have been installed. As of
30 September 2023, around 2,500t of steel has been erected in the furnace
building, with the fifth and final level in place. The next phase of work
underway are the installation of the calcine feed bin covers and the
electrodes. Refractory installation is expected to commence in Q1-2024,
starting around the feed pipes before focusing on the internal lining of the
circular 18m by 7.25m furnace.

 

The Electric Arc Furnace building in the centre with the electrical
transformer being positioned on the second level, to the left of the image is
the refinery building.

 

Following the granting of Araguaia's mining authorisation in mid-2023, mining
has progressed well with around 138,000 tonnes of ore stockpiled and
categorised on the run-of-mine (ROM) pad as of 30 September 2023, averaging
1.92% Ni. By year end, the Company anticipates having stockpiled around
250,000 tonnes, at an average grade of 1.90% Ni, in line with the target for
the year.

 

 

 

Mining at the Pequizeiro pit showing the excavators currently in the
high-grade transition zone. The processing plant is shown in the background
approximately 500m from the mine.

 

 

Around 138,000 tonnes of ore stockpiled and categorised on the ROM pad as of
30 September 2023.

 

Power infrastructure

 

All 260 transmission line towers have been erected and the entire 126km of
conductor cable installation has been completed. Commissioning of the 230kV
power transmission line from the Xinguara Bay substation to the Araguaia
project has begun and is due to be concluded by February 2024.

 

Out of a total of 260 transmission towers:

·  260 foundations have been poured (100% complete)

·  260 towers have been erected (100% complete)

·  126km of conductor cable installation has been completed (100% complete)

 

 

The Araguaia sub-station with both of the main 230kV/34.5kV transformers
installed.

 

At the Xinguara Bay substation:

·  Engineering is complete

·  Procurement and civil works well advanced

·  Electromechanical erection is advancing, targeting completion by year
end.

A technical inspection was undertaken by the Pará State Secretariat for
Environment and Sustainability ("SEMAS") in late August 2023 in anticipation
of the powerline commissioning and the issuance of the Operating Licence.

 

 

Water storage reservoir

 

The Water Storage Reservoir (WSR) continues to advance with Cofferdam
construction now completed. Construction of the principal embankment is
underway with jet grouting expected to be concluded mid-November. A delay in
completion has been driven by the requirement for additional jet grouting to
address geotechnical conditions. The Company is targeting year end to
commission the WSR, and once complete, the WSR will provide a constant source
of cooling water to the process plant and act as a heat sink for the furnace.

 

Water Storage Reservoir where the Cofferdam is now completed and construction
of the principal embankment is underway.

 

Contracts & Procurement

 

All critical equipment packages have been contracted and are either on site or
en route to site with around 90% of procurement now complete. Over three
quarters of the smaller, non-critical auxiliary packages have been contracted,
with items such as consumables and workshop equipment under tender. All
remaining packages are expected to be finalised by year end following which
the Contract and Procurement teams focus will be on ensuring all materials and
equipment are delivered safely to site, in line with the updated project
schedule.

 

Engineering

 

As of September 2023, engineering had reached 99.8% for first issue of
drawings and 93% for issue for construction (IFC). Engineering still to
complete relates to utilities for the Nitrogen, Oxygen, LPG and Diesel Fuel
EPC supplier packages which are not on the critical path.

 

 

Environmental activities

 

Within the quarter, the Company completed the sealing of roads adjacent to
five small rural villages and additionally implemented enhanced dust
suppression in localities proximal to residential areas.  Horizonte has
remained actively engaged with these rural communities and results of
automatic air quality monitoring stations and, importantly, feedback from
these communities, now indicates that dust management protocols are
effectively addressing construction related increases in road traffic.

 

Beyond Horizonte's investment of over BRL 50m in state and municipal road
upgrades in 2022 - including widening, capping, safety controls and bridge
upgrades, making what were previously poor quality roads safe for increased
levels of activity - and the BRL 3.9m spent on surfacing near rural villages,
the Company made a further commitment to support the Municipality in its
commitment to seal 2 km of state road at the outskirts of the Conceição do
Araguaia urban area. The Company has now completed tendering and expect these
works to commence in Q4 2023.

 

In other environmental management activities, Horizonte concluded a major
programme of impact avoidance in the period, confirming the re-design of the
Pequizeiro stockpile to avoid 49 ha of native vegetation. This important
project enhancement means that in terms of overall Araguaia land take, almost
three quarters of the land disturbance will be restricted to highly modified
pastureland. In line with biodiversity commitments, Horizonte continues to
explore further opportunities to avoid biodiversity impacts. Also in the
period, the primary flora and fauna rescue activities, conducted by specialist
botanists and zoologists associated with the Araguaia development were
completed. These highly successful programmes have, since construction
commencement, resulted in the registration of over 1,200 animals, as well as
collection of over 19kg of seed from 43 species for mine site reclamation and
farm afforestation.

 

Social management

 

In conjunction with the management of construction related impacts, several
programmes continued in the quarter to enhance the benefits that can be
realised by host communities from the long-term presence of Horizonte in the
area. In July 2023 the first group of local companies participating in our
Supplier Development Programme concluded their formal training and mentoring
phase of the programme. The second group of local companies commenced training
in August 2023 and included smaller rural communities of Chapéu de Palha and
Vila Joncon. The objectives of this programme are to increase participation by
local companies in the Horizonte supply chain, to maximise retention of value
by host communities and stimulate market growth and economic diversity.

 

In relation to the Araguaia Resettlement Action Plan, as at the end of the
quarter, five project affected households had been successfully resettled to
their new homes. Families involved in the resettlement programme commenced the
first phase of agroecology focussed training covering topics including rural
property management, sustainable farm management and soil preparation.

 

The Company Health Promotion and Prevention Programme during the period
included training for school students on relevant social and health issues
including mental health, child protection and rights, and teen pregnancy.
These educational activities supported formal curriculum aligned education on
youth multipliers in health.

 

 

Permitting

 

September 2023 saw the submission of numerous reports to the environmental
regulator ("SEMAS") illustrating compliance with various Installation Licence
(construction) conditions. In Brazil, environmental licencing follows a
three-stage process: i) preliminary licence (LP) issued following assessment
and acceptability of the project proposal and impact assessment; ii)
installation licence (LI) allowing construction and other preliminary
development, such as pre-stripping; and iii) operational licence (LO),
allowing the use and operation of the constructed/developed infrastructure.
The submission of documents demonstrating compliance with an Installation
Licence is a regulatory predecessor for issuance of the related Operational
Licence. Key submissions related to: the Arraias River water pipeline (that
will transmit water for the filling of the water storage reservoir); the 230kV
transmission line (operational electricity supply); and temporary fuel station
(fleet fuelling and process plant commissioning).

 

Horizonte has received all required project approvals relevant to this phase
of the Araguaia project and does not anticipate any issues in relation to
issuance of operational licences. In the reporting period Horizonte also
submitted compliance documentation in relation to the mining authorisation
awarded to the Company in Q2-2023, allowing the commencement of mining and
stockpiling of ore.

 

 

ARAGUAIA LINE 2: FEASIBILITY STUDY EXPECTED IN Q4 2023

 

The results from the Feasibility Study on Araguaia Line 2 remain on track to
be published in mid Q4-2023. The combined production of Araguaia Line 1 and 2
is expected to be 29,000 tonnes per annum.

 

VERMELHO NICKEL-COBALT PROJECT

 

The FS for Horizonte's 100% owned Vermelho project in Brazil is currently
on-going. Vermelho has a high-grade scalable resource with a long mine life.
Given Vermelho's geological characteristics, the ore has the ability to be
processed either through High-Pressure Acid Leach ("HPAL") or Rotary Kiln
Electric Furnace ("RKEF") technologies. As part of the study and driven by the
evolving market dynamics, Horizonte is evaluating the optimal final nickel
product that will supply the critical metals market.

 

 

For further information, visit www.horizonteminerals.com
(http://www.horizonteminerals.com) or contact:

 

 Horizonte Minerals plc                                                     info@horizonteminerals.com (mailto:info@horizonteminerals.com)

 Jeremy Martin (CEO)                                                        +44 (0) 203 356 2901

 Simon Retter (CFO)

 Patrick Chambers (Head of IR)

 Peel Hunt LLP (Nominated Adviser & Joint Broker)                           +44 (0)20 7418 8900

 Ross Allister

 David McKeown

 Bhavesh Patel

 BMO (Joint Broker)                                                         +44 (0) 20 7236 1010

 Thomas Rider

 Pascal Lussier Duquette

 Andrew Cameron

 Barclays (Joint Broker)                                                    +44 (0)20 7623 2323

 Philip Lindop

 Richard Bassingthwaighte

 Tavistock (Financial PR)                                                   +44 (0) 20 7920 3150

 Jos Simson

 Cath Drummond

 

 

ABOUT HORIZONTE MINERALS

Horizonte Minerals Plc (AIM/TSX: HZM) is developing two 100%-owned, Tier 1
projects in Pará state, Brazil - the Araguaia Nickel Project and the Vermelho
Nickel-Cobalt Project. Both projects are high-grade, low-cost, with low carbon
emission intensities and are scalable. Araguaia is under construction and when
fully ramped up with both Line 1 and Line 2, is forecast to produce 29,000
tonnes of nickel per year. Vermelho is at feasibility study stage and is
expected to supply nickel to the critical metals market. Horizonte's combined
production profile of over 60,000 tonnes of nickel per year positions the
Company as a globally significant nickel producer. Horizonte's top three
shareholders are La Mancha Investments S.à r.l., Glencore Plc and Orion
Resource Partners LLP.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Except for statements of historical fact relating to the Company, certain
information contained in this press release constitutes "forward-looking
information" under Canadian securities legislation. Forward-looking
information includes, but is not limited to, the ability of the Company to
complete any planned acquisition of equipment, statements with respect to the
potential of the Company's current or future property mineral projects; the
ability of the Company to complete a positive feasibility study regarding the
second RKEF line at Araguaia on time, or at all, the ability of the Company to
complete a positive feasibility study regarding the Vermelho Project on time,
or at all, the success of exploration and mining activities; cost and timing
of future exploration, production and development; the costs and timing for
delivery of the equipment to be purchased, the estimation of mineral resources
and reserves and the ability of the Company to achieve its goals in respect of
growing its mineral resources; the realization of mineral resource and reserve
estimates and achieving production in accordance with the Company's potential
production profile or at all. Generally, forward-looking information can be
identified by the use of forward-looking terminology such as "plans",
"expects" or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not anticipate",
or "believes", or variations of such words and phrases or statements that
certain actions, events or results "may", "could", "would", "might" or "will
be taken", "occur" or "be achieved". Forward-looking information is based on
the reasonable assumptions, estimates, analysis and opinions of management
made in light of its experience and its perception of trends, current
conditions and expected developments, as well as other factors that management
believes to be relevant and reasonable in the circumstances at the date that
such statements are made, and are inherently subject to known and unknown
risks, uncertainties and other factors that may cause the actual results,
level of activity, performance or achievements of the Company to be materially
different from those expressed or implied by such forward-looking information,
including but not limited to risks related to: the inability of the Company to
complete any planned acquisition of equipment on time or at all, the ability
of the Company to complete a positive feasibility study regarding the
implementation of a second RKEF line at Araguaia on the timeline contemplated
or at all, the ability of the Company to complete a positive feasibility study
regarding the Vermelho Project on the timeline contemplated or at all,
exploration and mining risks, competition from competitors with greater
capital; the Company's lack of experience with respect to development-stage
mining operations; fluctuations in metal prices; uninsured risks;
environmental and other regulatory requirements; exploration, mining and other
licences; the Company's future payment obligations; potential disputes with
respect to the Company's title to, and the area of, its mining concessions;
the Company's dependence on its ability to obtain sufficient financing in the
future; the Company's dependence on its relationships with third parties; the
Company's joint ventures; the potential of currency fluctuations and political
or economic instability in countries in which the Company operates; currency
exchange fluctuations; the Company's ability to manage its growth effectively;
the trading market for the ordinary shares of the Company; uncertainty with
respect to the Company's plans to continue to develop its operations and new
projects; the Company's dependence on key personnel; possible conflicts of
interest of directors and officers of the Company, and various risks
associated with the legal and regulatory framework within which the Company
operates, together with the risks identified and disclosed in the Company's
disclosure record available on the Company's profile on SEDAR at
www.sedar.com, including without limitation, the annual information form of
the Company for the year ended December 31, 2022, and the Araguaia and
Vermelho Technical Reports available on the Company's website
https://horizonteminerals.com/. Although management of the Company has
attempted to identify important factors that could cause actual results to
differ materially from those contained in forward-looking information, there
may be other factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that such statements will prove to be
accurate, as actual results and future events could differ materially from
those anticipated in such statements.

 

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