Horizonte Minerals stock plummets over funding uncertainty for Brazil nickel project

Horizonte Minerals (TSX: HZM; AIM: HZM) has paused most construction activities at its Araguaia nickel project in Brazil as its cash resources dwindle and the company continues to seek new sources of funding.

As of last week, the company had US$38 million in cash and US$131 million undrawn on the company’s senior debt facility. This, according to Horizonte, should provide the company with sufficient working capital to around mid-December 2023.

In order to access its senior debt facility, the company needs a fresh capital injection. However, it is likely that new funding won’t be secured until late in the first quarter of 2024.

In an update Tuesday, Horizonte confirmed it has hosted a series of site visits with key shareholders and lender representatives. These groups are conducting due diligence as part of a funding plan that’s expected to be finalized in the first quarter of 2024.

The company aims to put in place a financing solution for the US$537 million project that will satisfy the cost to complete requirements, and thereby allow it to continue to access its senior debt facility, Horizonte stated.

“Discussions with the company’s major shareholders and lenders on funding the project to completion are progressing. While work on the funding solution continues, we have elected to focus capital and human resources on the critical work packages,” CEO Jeremy Martin said in the news release.

The Araguaia project is being developed as Brazil’s next major ferronickel mine. A feasibility study has confirmed it to be a Tier 1 project with capable of producing 14,500 tonnes of nickel over a 28-year mine life.

In October, Horizonte announced that the cost of the project is expected to rise by 35%, a year after the company had increased the capital expenditure for Araguaia to US$537 million. As a result, first production has been delayed to the second half of 2024.

Shares of Horizonte Minerals plummeted by nearly 47% as of 12:20 p.m. in Toronto. The U.K.-based nickel developer has a market capitalization of $45.4 million.