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Glencore-backed nickel miner Horizonte Minerals has warned it needs another financial injection after reporting a more than doubling in the cost to build its flagship project in Brazil.
The London-listed group reported an 87 per cent increase in the cost to build the Araguaia nickel mine to $1bn from $537mn.
Although its shares were trading below 10p before the warning after crashing in October, they tumbled more than 60 per cent to 3.29p by Tuesday afternoon.
It reduced the Aim-listed company’s market capitalisation to less than £10mn from more than £400mn before the October fall.
In October, shares plummeted after the company announced capital expenditure on the mine would run over by at least 35 per cent and first production would be delayed to the third quarter of 2024.
First production is now not expected until the first quarter of 2026, assuming financing can be secured.
Interim chief executive Karim Nasr has said the company is seeking a full financing solution, which it will put together over the coming weeks.
However, he warned there was “no guarantee of success” and it would need interim funding on top of the $20mn the company secured from its three largest investors — La Mancha Resource Capital, Glencore and Orion Resource Partners — at the end of last year after overhauling management.
The company plans to work closely with these shareholders and lenders on financing, which it aims to finalise before the end of June. Discussions would also be held on restructuring debt facilities, it said.
The mismanaged budgeting is a blow to Glencore, which holds 17.7 per cent of the company’s shares and is entitled to future supply from the mine for 10 years.
It is also a setback for La Mancha Resource Capital, the mining investment fund set up by Egyptian telecoms billionaire Naguib Sawiris, which owns 23 per cent of the group, and Orion Resource Partners, which owns 10.5 per cent.
The mine, which aims to produce ferronickel used in stainless steel, could help diversify global supply of the metal beyond Indonesia, which produces more than half of the world’s nickel.
However, the cost blowout has knocked investor confidence in the nickel sector at a time of concern about a structural glut due to a supply surge in Indonesia.
BHP, the world’s largest nickel producer, booked a $3.5bn writedown on its Nickel West operation in Australia last week.
It also reiterated on Tuesday that it believed the metal, also used in EV batteries, was at risk of being oversupplied for the rest of the decade.
