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Developing the next major nickel project in Brazil

Investing in Nickel

Highlights

  • Demand for the raw materials for Electric Vehicles (EV) is expected to boom
  • Demand for Stainless Steel remains strong and continues to grow
  • Due to low prices in recent years, few new nickel projects have advanced
  • On average, Greenfield Nickel projects take 8-10 years to enter production
  • Nickel Sulphide operations are now more expensive on an operating cost basis than Nickel Laterite operations
  • Horizonte Minerals owns 100% of one of the worlds largest undeveloped nickel laterite deposits, within one nickel district
  • Horizonte’s Araguaia ferronickel project provides investors with exposure to the Stainless Steel nickel market and demonstrates robust economics
  • Horizonte’s Vermelho nickel cobalt Project provides investors with exposure to the EV battery market, with a Pre-Feasibility Study due imminently
Why invest in nickel

Why Invest in Nickel Now: Market Fundamentals

Interest in nickel investing is on the rise in 2019. We believe the nickel market fundamentals are pointing in the right direction for investors now, and in years to come.

Demand for nickel is on the rise with strong demand for stainless steel continuing to grow, as well as significant new demand for Electric Vehicles (EVs) and Electric Storage (ES).

Wood Mackenzie, nickel market experts, anticipate an increase in nickel demand from EVs of 1.23 Mt by 2040. To put that into context, the global nickel market today is around 2.2 Mt.

Looking at the whole nickel market, Wood Mackenzie anticipates total global consumption of nickel to rise to 4.074M tonnes by 2040. To put simply, the nickel market will double in the next 20 years.

But it’s not just demand that plays a role. Supply is an important factor. High levels of nickel stocks have kept the nickel price at low levels over recent years. However, stocks are now dwindling as demand outpaces supply. LME nickel stocks are at their lowest levels in over 6 years.

Nickel Price Forecast

Consensus long-term nickel price forecasts are currently around US$16,400 per tonne of nickel.

Wood Mackenzie’s long-term incentive nickel price forecast is around $20,000 per tonne of nickel today.

The Stage 1 Base Case for Horizonte’s 100% owned Araguaia project’s Feasibility Study was US$14,000; however, based on the consensus long-term nickel price of $16,400, the project NPV is $691 million generating free cash flow of over US$2.9 billion, giving an IRR of 27%.

Investors can plug-in their own nickel price into our NPV calculator on the Araguaia project page.

Different Types of Nickel: Expelling the Myth about Sulphides Vs Laterites

There are two main types of nickel ore deposits: Sulphides and Laterites. Many investors are of the view that Sulphide deposits are easier to process and therefore cheaper as they require less energy to operate. But whilst nickel sulphide operations were historically cheaper on an operating cost basis, that is no longer the case. For the past three years, on average nickel laterite operations have been cheaper than nickel sulphide operations to operate, and we expect that trend to continue.

Sulphide vs Laterite nickel deposit operation cost comparison
Source: Wood Mackenzie

Diversifying Your Nickel Portfolio

Stainless Steel is still dominating the nickel demand today with around two-thirds of nickel production going into Stainless today. The nickel product that goes into Stainless is usually ferro-nickel or nickel pig ion (NPI), also classified as Class 2 nickel.

The demand for metals required for EVs and ES is set to increase significantly as we move towards an electrified world. One of the challenges for the EV battery supply chain is the type of nickel required to make batteries. Class 1 nickel is needed, commonly in the form of mixed hydroxide precipitate (MHP) or Nickel Sulphate. Therefore, it’s not as simple as directing Class 2 nickel suitable for Stainless to the EV battery supply chain.

As you can see from the graph below, as the battery market expands, this will limit the supply of nickel available to other applications. On the whole, the growing demand in both Stainless and EV sectors is likely to lead to nickel price increases across the entire nickel market.

Nickel use prediction pie chart
Given the movements in the nickel market, Horizonte recommends diversifying a nickel portfolio to ensure exposure to both stainless steel and EV/battery nickel markets. A diversified portfolio allows investors to participate in the wider nickel market. By servicing both sides of the market Horizonte are further de-risking investment and providing longer term stability.

Horizonte’s Strategy: Nickel Investment of Choice

Horizonte is positioning itself as the nickel investment of choice.

The company now owns one of the largest nickel districts in the world, with over 280 million tonnes of resource, south of the well-developed Carajás mining district, which has good infrastructure, water, energy and skilled labour.


This generates the potential for Horizonte to develop two mining centres within trucking distance of each other, through the implementation of two major nickel projects:

  • The Araguaia project, is being developed as the next major ferronickel mine in Brazil, aimed at the Stainless Steel market
  • The Vermelho nickel-cobalt project, is one of the largest nickel laterite resources in the world, which is being developed to supply nickel and cobalt to the EV battery market.

Both projects are 100% owned.
Horizonte nickel mining district map

Download our Investor Presentation for further information.

Sources:
Wood Mackenzie
Nickel Institute
Vale

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