Horizonte Minerals (AIM:HZM) Araguaia Construction Update

CONSTRUCTION OF THE ARAGUAIA NICKEL PROJECT
REMAINS ON BUDGET AND ON-SCHEDULE

 HIGHLIGHTS:

· Araguaia Nickel Project Line 1 remains on-schedule for production in Q1 2024 with over 50% of the construction programme completed to date

–  Strong safety performance, no lost time injuries with over two million hours worked

–  Earthworks are complete and detailed engineering is 95% complete

–  Key long lead items remain on track, with the rotary kiln and dryer en route to site

–  Pre-stripping activities have commenced on the main Pequizeiro Pit with ore stockpiling to begin in Q3 2023  

· Araguaia Nickel Project Line 1 remains on-budget with 90% of the total capital awarded as at 31 March 2023

· Araguaia Nickel Project line 2 Feasibility Study, which aims to double nickel production from 14,500 tonnes per annum to 29,000 tonnes per annum, remains on track for publication in H2 2023

Horizonte Minerals Plc (AIM/TSX: HZM) (“Horizonte” or the “Company”) reports that it is continuing to make good progress on the construction of its 100%-owned Araguaia Nickel Project Line 1 (“Araguaia” or “the Project”) in Brazil, which remains on-budget and on-schedule to commence production in Q1 2024.

As of 30 March 2023, approximately 50% of the Araguaia Line 1 construction programme had been completed and approximately 90% of capital expenditure had been awarded, amounting to approximately US$485 million. Moreover, the earthworks have been completed, detailed engineering works are at 95% maturity, and electro-mechanical installations are advancing. The key long lead items remain on schedule for delivery to site, with the rotary kiln and dryer in Brazil and currently en route to site. In addition, the grade control drilling programme has been completed with the data utilised for the short term mining planning and the commencement of pre-stripping activities on the main Pequizeiro Pit, with ore stockpiling to begin in Q3 2023.

In addition to advancing the Araguaia construction activities, Horizonte is also making good progress on advancing its growth pipeline. The Araguaia Line 2 Feasibility Study (“FS”), which aims to double nickel production from 14,500 tonnes per annum to 29,000 tonnes per annum and allow Araguaia to not only produce high-grade low impurity ferronickel but also potentially nickel matte that can be upgraded to feed directly into the electric vehicle battery chemistry supply chain, remains on track for publication in H2 2023. Regarding Horizonte’s 100% owned Vermelho project in Brazil, which is expected to produce 24,000 tonnes of nickel and 1,250 tonnes of cobalt to supply the EV battery market, work remained centred on the FS and the EIA permitting process, with the FS due for completion in H1 2024.

Jeremy Martin, CEO of Horizonte, commented: “We are pleased to confirm we remain on-schedule for first metal at Araguaia targeting Q1 2024, most importantly with a strong safety culture installed across the project. There is currently a key focus on operational readiness as we build out the operational team and establish the systems, processes and training required for the start-up phase.

“Alongside the construction progress at Araguaia Line 1, with the award of the Line 2 Feasibility Study contracts, we are one step closer to delivering on this low capex project that will double nickel production. Vermelho workflows remain centred around the Feasibility Study with onsite data collection progressing well, feeding into the process engineering that is underway with Wood plc in Perth.

“We are pleased by the progress made to date on all workstreams and are confident in our ability to continue to deliver as we head toward first nickel in Q1 2024.”

Management will be hosting a webinar today, 24 April 2023, at 14:00 BST to discuss Araguaia’s construction progress. Investors and analysts are invited to access the webinar by registering in advance via the following link: https://www.investormeetcompany.com/horizonte-minerals/register-investor. Questions may be submitted at any time during the live presentation. A recording of the webinar will be available on the Company’s website shortly after its conclusion.

ARAGUAIA LINE 1 CONSTRUCTION: FIRST METAL ON SCHEDULE FOR Q1 2024

 1.  Health, Safety & Wellbeing

The lost-time injury frequency rate (“LTIFR”) for Araguaia as at March 31 2023 was 0.00 and the total recordable injury frequency rate (“TRIFR”) was 0.97 based on a 12-month rolling average, which are calculated per million hours worked. This compares favourably with a TRIFR of 1.16, as at the end of the previous quarter. Horizonte has continued to focus its efforts on embedding the critical risk controls with its growing workforce and reinforcement of its safety Golden Rules. To complement these activities, the Company continued to implement tools to increase involvement and participation by our contracting partners in our safety systems and processes. From project life to date, over 4,100 internal safety audits have been conducted and over 5,100 safety plan observations have been completed. In the quarter, to coincide with the projects move to mechanical construction, an extensive focus on working at heights and associated training and rescue planning was completed. Fire and emergency services training also occurred.

 2.  Construction activities

As seen in Figure 1, solid progress has been made on the construction of the electric arc furnace, the core of the Araguaia RKEF processing facility. Supplied by Hatch ltd, the 18-metre diameter furnace will operate at a temperature range of up to 1,550 ºC with a nameplate capacity of 65 MW, producing up to 14,500 tonnes of nickel per year. As part of the modular build schedule for the furnace building, the third of five stories is being lifted into place. The electro-mechanical installation continues to advance on schedule with the erection of the furnace baseplate and the lower and upper side walls of the furnace now interlocked with welding near complete.

 Figure 1: Electric Arc Furnace facility, showing the circular furnace in the centre of the facility covered to allow internal welding to take place, surrounded by the blue structural steel work of the building that supports all of the associated equipment required for furnace operation.

 Figure 2 shows the erection of the four calciner support columns that will support the 110m long rotary kiln. Civil and concrete works are complete for two of the pillars and the remaining two are due for completion by the end of April. The rotary kiln and dryer, key long lead items, are on route to site having arrived in Brazil in early April. Upon arrival at site, the rotary kiln will go through a complex erection process with individual rings welded together before being lifted and positioned on the support bearings located on the four elevated columns for final alignment and completion of welding and final assembly.

 Figure 2: The four 6m high columns to support the Rotary Kiln, showing the slip forms in place to cast the top cap sections.

 Civil works for the Dryer area are advancing on-schedule as seen in Figure 3. Piled foundations for the main dryer support columns are complete while erection of the two main dryer columns are ready for concrete application.

 Figure 3: Foundations of the dryer support columns, showing steel form work ready for the application of concrete.

 As shown in Figure 4, civil foundation works for the homogenisation building are close to being concluded. Approximately 30% of the building is now undergoing electromechanical installation with the first structural steel having been erected for the covered homogenisation building.

 Figure 4: Steel erection works underway on the homogenisation building.  

 As shown in Figure 5, the civil works for the primary and secondary crusher have been concluded with the erection of the steel structure ongoing.

Figure 5: The primary and secondary crushing area.

 As shown in Figure 6, the 230kV powerline construction continues to advance on schedule. To date, 152 pylons have been erected with 213 foundations concluded out of a total of 260.

Figure 6: The 230kV powerline construction.

​3.  Commencementof pre-stripping activities

In February 2023, Horizonte entered into a five-year mining services agreement with Fagundes, a leading Brazilian contract mining company. Services include; pre strip of waste, ore mining, stockpile generation, plant feed and slag handing. Early pre-stripping activities have begun at site along with the delivery of mining equipment ahead of initial mineralised ore stockpiling.

 4.  Environmentalactivities

In preparation for the transition from construction to operations and ahead of the upcoming dry season, environmental management in the period has focussed on managing the impact of fugitive dust from road traffic. Horizonte has invested over BRL 50M in state and municipal road upgrades – including widening, capping, safety controls and bridge upgrades. In support of monitoring the effectiveness of these controls, the Company has recently installed a suite of continuous air quality monitoring stations. In addition, the construction of river flow monitoring stations to monitor the Arraias river has recently commenced. These new stations will complement the existing monitoring of noise, vibration, vehicle emissions, water, soils and flora and fauna.

 At Vermelho an array of FS related environmental activities have progressed including surface water census, preliminary catchment modelling, topographic data acquisition and geochemical analysis campaigns. These programmes will build on the extensive baseline and previous project studies undertaken by Horizonte and Vale. Also in the period, discussions advanced in regards to compensatory biodiversity actions, including a visit to the Veredas Municipal Park, the location at which compensatory planting is expected to be implemented, and noise monitoring of the geotechnical drilling campaign was conducted, with satisfactory outcomes.

 5.  Social activities

In the quarter, Horizonte continued to implement a range of social programmes at Araguaia to avoid and minimise impacts associated with construction. In conformance with International Finance Corporation Performance Standard 5, the Company has been advancing various initiatives in support of the families that are directly project affected. The construction of the first two houses for resettled families is well advanced and agronomic support is being provided as part of the livelihoods restoration and enhancement plan. Also in the period, the Company conducted a sampling of community water supply systems and engaged with them on the results of the water quality testing. None of the results were project impacted, however valuable engagement occurred as the Company raised awareness on ‘safe’ water supply, hygiene and health. The programmes were well received by the community participants.

 6.  Permitting

Applications have been submitted for the Licença de Operaço (Operating Licence) for mining and processing at Araguaia, as well as for renewal of existing Licença de Instalaço (Installation Licences, i.e. construction licences). These permitting processes are ongoing.

 ARAGUAIA LINE 2: FEASIBILITY STUDY EXPECTED IN 2H 2023

 In March 2023, Horizonte awarded the Araguaia Line 2 FS contracts aiming to double nickel production to 29,000 tpa at Araguaia through the construction of a duplicate RKEF processing facility (“Line 2”). As part of the FS, an option will be designed into the flow sheet to allow a portion of the furnace product from Line 2 to be converted to nickel matte allowing Araguaia not only to produce high-grade low impurity ferronickel, but also matte that can be upgraded to feed directly into the electric vehicle battery chemistry supply chain. Araguaia line 2 is expected to deliver greater production flexibility, lower capital intensity and increased operating margins. The aim of the FS is to produce a NI 43-101 Feasibility Report supported by a AACEI Class 3-quality cost estimate, and project execution plan. The Company continues to target publication of the study results in 2H 2023.

 PROJECT FINANCING ACTIVITIES

As announced on 27 February 2023, US$50 million was drawn down from the second tranche of its senior secured project finance debt facility of US$346 million (the “Senior Debt Facility”). Subsequently, Horizonte has drawn down from the third tranche of the Senior Debt Facility an amount in line with the budget associated with the requirements for the construction of the Araguaia Nickel Project.

 All conditions precedent for the second and third tranche of Senior Debt Facility have been satisfied and funds received. Further tranches of the Senior Debt Facility will be drawn down as required.

 To date US$485 million capital expenditure has been awarded which includes the majority of the key long lead items. The remaining Project capital commitment is comprised of US$18 million for process related equipment, US$19 million for overall site construction with the balance being costs that relate to materials and operational readiness in the lead up to first production.

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