Horizonte Minerals (HZM.L) released an updated capex estimate and timeline for the completion of the construction of its Araguaia nickel mine in Brazil. As a reminder, that mine is anticipated to produce 29,000 tonnes of nickel per year.

Unfortunately the project has been plagued by serious cost overruns. The initial capex estimate was just $537M but this has now bene hiked to approximately $1B. The entire amount that was thought to be the original capex has been spent ($479M has actually been spent while there are open invoices to the tune of $52M) which means the company is now actively looking for ‘funding solutions’ to secure financing for the remaining portion of the capex. Horizonte hopes to have the additional financing in place sometime during the second quarter but there are obviously no guarantees, nor do we know what the definitive financing package will look like. Although the nickel price recently bounced off its lows, the current price of $17,300/t is still approximately 30% lower than where the metal was trading at a year ago.

The funding hiccup also means the completion date of the project is delayed. The company’s consultants anticipate an 18 month construction period after securing funding which means that if construction activities restart in Q3 2024, the mine will only be completed in the first quarter of 2026. On top of that, even when the mine goes into production, the ramp-up to full capacity will go much slower than anticipated: the 12 month ramp-up period has now increased to 18 months.

Disclosure: The author has no position in Horizonte Minerals. Please read the disclaimer.

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