One Futher Reason to add Horizonte Minerals #HZM to your Watchlist - Vox Markets
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One Futher Reason to add Horizonte Minerals #HZM to your Watchlist

The content of this blog (or content associated with it) is not intended as investment advice. I own shares in the company featured. Please do your own research.

Horizonte Minerals (HZM)
Share Price: 2.725p
Market Capitalisation: £31.94m

What Do They Do?
Horizonte Minerals is developing a tier one major nickel mine in Brazil, with targeted production by late 2019.

I wrote about Horizonte Minerals, in more detail in January, you can read that blog by clicking here.

The figures around this prospect are compelling, even more so, when you consider Horizonte Mineral’s market capitalisation is below £32m.

The table below is the results of their pre-feasability study:

In late 2019 Horizone Minerals will start producing Nickel. When fully operational, they intend to produce 14,500 tonnes of nickel per annum, which at $12,000 per tonne, generates $44m dollars a year free cash flow or £34m (at today’s exchange rate).

This is more free cash flow, in one year, than their current market cap and they are going to be doing this for 28 years.

Remember this is free cash flow, so that’s approximatley $80m of profit a year.

One Futher Reason to add Horizonte Minerals #HZM to your Watchlist

More and more governments around the world are committing to a future without petrol or diesel fuelled vehicles. One of the major alternatives, is electric vehicles, which rely on battery power containing nickel.

Horizonte’s Chairman recently pointed out:

“In terms of drivers, nickel is primarily used in stainless steel production, although an Electric Vehicle revolution would add a new driver to the market considering Mr. Musk’s comments last year that his lithium ion batteries should be called nickel-graphite batteries as there are c. 11kg contained nickel in a 250kg EV battery. Indeed, Macquarie recently noted that “nickel use in batteries could more than double over the next 10 years from around 70kt to close to 160-170kt”.

The nickel market is also “moving into deficit after five years of over-supply, the nickel price is currently on the rise, reaching a near four-month high in July on renewed supply worries and higher stainless steel prices, albeit from a lower level due to recent political instability in the Philippines which caused the most recent dive.”

Horizonte Minerals have a world class, tier 1 asset, which will be moving into production by the end of 2019. Being on the lower range of the global cost curve means Horizonte could already produce this nickel profitably. A supply deficit in the market combined with increased demand from the long term boom in electric vehicles means its logical to assume the price of nickel will only continue to rise, until supply adjusts.

Should this happen then I don’t think it would be an extreme prediction to suggest Horizonte’s pre-feasability study based on nickel prices at $12,000 and $14,000 per tonne could seem conservative, meaning they could produce in excess of $2bn dollars over the life of their mine.

If you’re thinking, “How is a small cap company in possession of such a large, high quality asset?” Well simply put, they did some smart deals during the commodity downturn. If you need any convincing how good an asset this is, then check out the strength of their share register. Institutions such as JP Morgan, Glencore, Tech Resources and Hendersons do not take a stake in companies of Horizonte’s size unless there’s potentially significant return.

To add Horizonte Minerals (HZM) to your watchlist click here.

 

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The content of this blog (or content associated with it) is not intended as investment advice. I own shares in the company featured. Please do your own research.

Mentioned in this post

HZM
Horizonte Minerals