The Horizonte Minerals share price is down 85% since last Friday’s close after the nickel miner said on Monday that it had gotten its capital expenditure figures for the 100%-owned Araguaia Nickel Project wrong and was seeking additional financing.
As a result of the miscalculation, the first production of nickel is being pushed back to Q3 2024 from Q1 2024.
The delay in production will be a major disappointment for investors. However, the biggest concern in the short term is how they will finance the rest of the mine construction.
The feasibility study for the Araguaia Nickel Project attributed a capital cost of $443 million for the first stage of the Araguaia mine, with the second stage to be financed by cashflows from first stage production.
Horizonte said on Monday they now expect capital expenditure to be at least 35% more than first thought. This would represent around $155m.
The need for additional capital will be a bitter pill to swallow for investors who were told earlier this year that Araguaia was on schedule and on budget.
The company has previously financed the mine through debt and newly issued equity, with the lion’s share raised through a senior debt facility.
The worry for investors will be that Horizonte said they are exploring financing options with ‘various financial institutions together with the cornerstone shareholders’. Cornerstone shareholders’ involvement would suggest Horizonte is considering an equity placing that could be highly dilutive for existing shareholders.
With Horizonte’s market now at just £44m, an equity placing could be problematic. The company didn’t issue any further details on financing options, which has added to the uncertainty and can be attributed to a proportion of the share price decline. One would assume they are looking at both debt and equity options.
There is of course value in the works already completed and the resources at Araguaia but how much of this value finds its way to Horizonte shareholders is now nothing more than speculation with little detail on future financing.
This is reflected in the Horizonte Minerals share price and it will require a brave investor to take the view the sell-off is overdone.