Horizonte Minerals halts US$1bn Brazil nickel project

London-listed exploration company Horizonte Minerals failed to arrange a financing solution for its US$1bn Araguaia nickel project in Pará state, northern Brazil, and is now considering various options for the initiative, including the sale of the asset.

"The company has been unable to secure interest in the full financing needed to complete the project or in a group acquiring the project," Horizonte said in a statement. 

"In the absence of a financing solution, Horizonte must now consider alternative options for the company’s subsidiaries in the interest of its secured creditors, which may include raising financing at the subsidiary level, a sale of the project whilst in care and maintenance, the liquidation of the assets of the project, or other options available under Brazilian laws," it added, underlining that it "does not believe that any of these options are likely to recover any value for the company’s shareholders." 

The problems with the project emerged earlier this year when Horizonte announced that it had raised the capex to US$1bn from US$537mn after previously alerting investors that the amount was under review due to underestimated costs for civil works, electromechanical assembly and delays in deliveries of materials, among other factors.

In addition to the higher capex, nickel prices have been on a downward trend, increasing the difficulties of arranging financing for Araguaia. However, experts do not see any significant rise in risks for other nickel projects.

"The Araguaia project suffered an isolated problem of increased costs. Nickel has suffered from falling prices, but we're not at a price level that would make other projects unfeasible. The long-term scenario for nickel demand is positive," Tito Martins, a mining consultant and a former Vale executive and former CEO of Nexa Resources, told BNamericas. 

"It is also worth mentioning that the global financing landscape is difficult at the moment, due to high interest rates, which makes any attempt to arrange fresh financing difficult, whether for healthy projects or projects with problems," added Martins.

Despite its importance for the energy transition due to its use in production of batteries for electric vehicles, nickel prices have been under pressure in recent months due to the start of operations of several projects in Indonesia. 

According to experts, some of the Indonesian initiatives have investment support from China, which is working to contain prices of inputs needed to supply its domestic battery production.

However, the positive long-term outlook for energy transition metals has still attracted major mining companies to the segment.

Vale, a global powerhouse in iron ore production, has created a subsidiary to manage its copper and nickel projects. Nevertheless, the current negative scenario for nickel has also affected the miner.

In the first quarter, Vale's nickel sales totaled 33,100t, down 17.5% year-on-year, and 30.9% lower than in 4Q23.

The price of nickel from Vale's operations reached an average of US$16,848/t in 1Q24, well down on the US$25,260/t seen in 1Q23 and also lower than the US$18,420/t reported in 4Q23, the firm said in a statement.

Araguaia is one of the largest nickel projects in the pipeline in Brazil. According to the BNamericas project database's Forecast tool, there are two other projects primarily focused on nickel production under development in Brazil, the details of which are as follows:

- Project: Jaguar Nickel

Company: Centaurus Metals

Construction phase: 2025-26

Capex: US$288mn

Location: Pará state

Operation start-up: 2027

Production: 27,800t/y

- Project: Santa Rita (underground expansion)

Company: Atlantic Nickel Mineração, owned by ACG Acquisition, comprising Glencore, Volkswagen and Stellantis

Start of construction phase: 2026

Capex: US$355mn

Location: Bahia state

Operation start-up: 2028

Production: 45,000t/y